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Author: Irene R

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 in Financial Reporting Analysis (FRA), Level II of the CFA® Program by Irene R

The Forecast Time Horizon
The forecast time horizon is influenced by the following: The investment strategy being considered: Professionally managed equity investments have an investment timeframe or the average holding period for a stock, corresponding with the average annual portfolio turnover. The cyclicality of...
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 in Financial Reporting and Analysis (FRA), Level II of the CFA® Program by Irene R

Effects of Technological Developments on Demand, Selling Prices, Costs, and Margins
Businesses and industries are affected by technological developments. It is, however, impossible to quantify these impacts without making assumptions about the future. These assumptions should be evaluated using scenario and sensitivity analysis to develop a range of earnings outcomes. There...
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 in Financial Reporting and Analysis (FRA), Level II of the CFA® Program by Irene R

Forecasting Industry and Company Sales and Costs When Subject to Inflation or Deflation
Inflation and deflation affect the accuracy of a company’s forecasts. The impact of inflation and deflation varies in the case of revenues and expenses. Some companies can pass on higher input costs by raising the prices of their products. Companies...
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 in Financial Reporting and Analysis (FRA), Level II of the CFA® Program by Irene R

The Impact of Competitive Position on Prices and Costs
Analysts forecast such things as revenues and profit margins. These things are affected by the competitive environment in which a company operates. Note that analysts base their projections on an estimate of a company’s future competitive strength. Analysts use Michael...
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 in Financial Reporting and Analysis (FRA), Level II of the CFA® Program by Irene R

Forecasting Costs
Forecasting COGS The cost of goods sold (COGS) includes raw materials, direct labor, and overhead costs used in producing the goods. COGS is directly related to sales and forecasted as a percentage of sales. Historical data on a company’s COGS...
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 in Financial Reporting and Analysis (FRA), Level II of the CFA® Program by Irene R

Building a Model to Value a Firm

 

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 in Financial Reporting and Analysis (FRA), Level II of the CFA® Program by Irene R

Balance Sheet Modeling
Some balance sheet items, such as retained earnings, flow directly from the income statement. Others, such as accounts receivable, inventory, and accounts payable, are closely linked to income statement projections. Working capital accounts are forecasted using efficiency ratios. For example,...
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 in Financial Reporting and Analysis (FRA), Level II of the CFA® Program by Irene R

Income Statement Modeling: Revenue

Analysts use three approaches to project future revenue. Top-down approach. Bottom-up approach. Hybrid approach. Top-down Approach The top-down approach begins at the level of the overall economy. Forecasts are then made at narrower levels, such as sector, industry, and market…

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 in Corporate Finance, Level II of the CFA® Program by Irene R

Study Notes for CFA® Level II – Corporate Issuers – offered by AnalystPrep

Reading 18: Analysis of Dividends and Share Repurchases -a. Describe the expected effect of regular cash dividends, extra cash dividends, liquidating dividends, stock dividends, stock splits, and reverse stock splits on shareholders’ wealth and a company’s financial ratios; -b. Compare…

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 in Level II of the CFA® Program, Portfolio Management by Irene R

Sensitivity Analysis

Monte Carlo simulation fits the factor returns to a multivariate normal distribution but fails to account for negative skewness and fat tails. This is what informs the need for a sensitivity analysis. The analysis is done by fitting a different…

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