The Impact of Competitive Position on Prices and Costs
Forecasting Costs
Modeling Non-operating Costs and Other Items
Financing Expenses Financing costs comprise interest expense and interest income, which are typically netted. Interest income is less significant to non-financial companies but a key revenue component for financial institutions such as banks and insurance companies. Interest income depends on…
Behavioral Finance and Analyst Forecasts
Financial statement models are not immune to behavioral biases. Analysts must be aware of the impact of behavioral biases and solutions to improve investment decisions and forecasts. The five key behavioral biases are overconfidence, conservatism, confirmation bias, the illusion of…
Balance Sheet Modeling
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 narrowed to such levels as sector, industry, and market for…
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…
Investment Action Evaluation
We will use an example to illustrate investment action evaluation for joint ventures, acquisitions, and equity investments. De Monte De Monte is a company that makes and sells vintage brandy and cognac. For the past five years, the company has…
Modeling and Valuation
A pro forma financial statement is an estimated financial statement with restructuring effects. The pro forma financial statement includes the EPS, revenue, and free cash flow measures. The situational specifics and the type of restructuring will determine the process of…
