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Financial Forecasting, Analysis and Modelling: A Framework for Long-Term Forecasting

Book Description

Risk analysis has become critical to modern financial planning

Financial Forecasting, Analysis and Modelling provides a complete framework of long-term financial forecasts in a practical and accessible way, helping finance professionals include uncertainty in their planning and budgeting process. With thorough coverage of financial statement simulation models and clear, concise implementation instruction, this book guides readers step-by-step through the entire projection plan development process. Readers learn the tools, techniques, and special considerations that increase accuracy and smooth the workflow, and develop a more robust analysis process that improves financial strategy. The companion website provides a complete operational model that can be customised to develop financial projections or a range of other key financial measures, giving readers an immediately-applicable tool to facilitate effective decision-making.

In the aftermath of the recent financial crisis, the need for experienced financial modelling professionals has steadily increased as organisations rush to adjust to economic volatility and uncertainty. This book provides the deeper level of understanding needed to develop stronger financial planning, with techniques tailored to real-life situations.

  • Develop long-term projection plans using Excel

  • Use appropriate models to develop a more proactive strategy

  • Apply risk and uncertainty projections more accurately

  • Master the Excel Scenario Manager, Sensitivity Analysis, Monte Carlo Simulation, and more

  • Risk plays a larger role in financial planning than ever before, and possible outcomes must be measured before decisions are made. Uncertainty has become a critical component in financial planning, and accuracy demands it be used appropriately. With special focus on uncertainty in modelling and planning, Financial Forecasting, Analysis and Modelling is a comprehensive guide to the mechanics of modern finance.

    Table of Contents

    1. Cover Page
    2. Title Page
    3. Copyright
    4. Dedication
    5. Contents
    6. Preface
    7. Acknowledgments
    8. About the Author
    9. PART One: Developing Corporate Finance Models
      1. CHAPTER 1: Introduction
        1. 1.1 WHAT IS FINANCIAL MODELLING?
        2. 1.2 DEFINING THE INPUTS AND THE OUTPUTS OF A SIMPLE FINANCIAL MODEL
        3. 1.3 THE FINANCIAL MODELLING PROCESS OF MORE COMPLEX MODELS
        4. 1.4 EXCEL AS A TOOL OF MODELLING: CAPABILITIES AND LIMITATIONS
        5. BIBLIOGRAPHY AND REFERENCES
      2. CHAPTER 2: A Short Primer in the Accounting of Financial Statements
        1. 2.1 THE ACCOUNTING EQUATION
        2. 2.2 THE BALANCE SHEET
        3. 2.3 THE INCOME STATEMENT
        4. 2.4 THE CASH FLOW STATEMENT
        5. 2.5 THE ARTICULATION OF INCOME STATEMENT, BALANCE SHEET, AND CASH FLOW STATEMENTS
        6. 2.6 FINANCIAL STATEMENT ANALYSIS: RATIO ANALYSIS
        7. BIBLIOGRAPHY AND REFERENCES
      3. CHAPTER 3: Financial Statement Modelling
        1. 3.1 INTRODUCTION – HOW FINANCIAL MODELS WORK
        2. 3.2 COLLECTING AND ANALYZING HISTORICAL DATA
        3. 3.3 SELECTING THE KEY FORECAST DRIVERS
        4. 3.4 MODELLING THE INCOME STATEMENT
        5. 3.5 MODELLING THE BALANCE SHEET
        6. 3.6 MODELLING INTEREST AND CIRCULAR REFERENCES
        7. 3.7 MODELLING THE CASH FLOW STATEMENT
        8. BIBLIOGRAPHY AND REFERENCES
      4. CHAPTER 4: Forecasting Performance
        1. 4.1 INTRODUCTION: DESIGNING A DASHBOARD-LIKE CONTROL PANEL
        2. 4.2 BASIC STATISTICAL METHODS USED FOR FORECASTING
        3. 4.3 FORECASTING SALES
        4. 4.4 FORECASTING COSTS
        5. 4.5 FORECASTING CAPEX AND DEPRECIATION
        6. 4.6 FORECASTING WORKING CAPITAL AND FUNDING NEEDS
        7. BIBLIOGRAPHY AND REFERENCES
      5. CHAPTER 5: Business Valuation
        1. 5.1 VALUATION APPROACHES
        2. 5.2 STEPS FOR APPLYING THE DCF METHOD
        3. 5.3 REWRITING FINANCIAL STATEMENTS – CALCULATION OF FREE CASH FLOWS
        4. 5.4 CALCULATING THE WEIGHTED AVERAGE COST OF CAPITAL
        5. 5.5 ESTIMATING THE TERMINAL VALUE
        6. 5.6 DCF SUMMARY – ENTERPRISE VALUE ADJUSTMENTS
        7. BIBLIOGRAPHY AND REFERENCES
    10. PART Two: Planning for Uncertainty
      1. CHAPTER 6: Using Sensitivity Analysis
        1. 6.1 INTRODUCTION
        2. 6.2 ONE-DIMENSIONAL AND 2-DIMENSIONAL SENSITIVITY ANALYSIS
        3. 6.3 CHOOSING THE VARIABLES TO CHANGE
        4. 6.4 MODELLING EXAMPLE
        5. BIBLIOGRAPHY AND REFERENCES
      2. CHAPTER 7: Using Scenarios
        1. 7.1 INTRODUCTION
        2. 7.2 USING SCENARIO ANALYSIS WITH EXCEL'S SCENARIO MANAGER
        3. 7.3 ALTERNATIVE WAYS TO CREATE SCENARIOS IN EXCEL
        4. 7.4 APPLYING SCENARIOS TO STEELCO'S CASE
        5. BIBLIOGRAPHY AND REFERENCES
      3. CHAPTER 8: Using Monte Carlo Simulation
        1. 8.1 INTRODUCTION
        2. 8.2 BUILDING UNCERTAINTY DIRECTLY INTO THE MODELLING PROCESS
        3. 8.3 PROBABILITIES, CUMULATIVE PROBABILITIES, AND FREQUENCY DISTRIBUTION CHARTS
        4. 8.4 MODELLING EXAMPLE
        5. REFERENCES AND BIBLIOGRAPHY
    11. Appendix
      1. 1. WALKING THROUGH THE EXCEL MODEL PROVIDED WITH THE BOOK (STEELCO SA 4YR BUSINESS PLAN)
      2. 2. OTHER EXCEL FILES PROVIDED WITH THE BOOK
    12. Index