From the course: Financial Forecasting with Analytics Essential Training
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Using data in Excel - Microsoft Excel Tutorial
From the course: Financial Forecasting with Analytics Essential Training
Using data in Excel
- [Instructor] Using regressions and other more advanced financial forecasting techniques does not preclude us from using simplistic methods, like a percent of sales forecast. Let's take a look at an example. I'm in the 0202 begin Excel file. Now what I'm going to do here is go through and build a percent of sales forecast based on a sales CAGR, assumptions about cost inflation, depreciation, amortization, inflation, the debt cost of capital, the tax rate, and the assumed interest rate. However, in this particular case, we've gone through and constructed three different scenarios: a gray sky scenario, a blue sky scenario, and a base case scenario. And in particular, the tie between this percent of sales or CAGR based forecast and something like a regression analysis might be where these numbers or assumptions come from. There's nothing wrong with using percent of sales as a method for forecast in the future. The challenge…
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