Financial Forecasting:

Transcription

1 Financial Forecasting: Tools and Applications Course Description Business and financial forecasting is of extreme importance to managers at practically all levels. It is required for top managers to make long-term strategic decisions. Middle management uses sales forecasts to develop their departmental budgets. Every other plan such as a production plan, purchasing plan, manpower plan, and financial plan follows from demand forecasting. The critical element in any supply chain plan is the demand forecast. The goal of this course is to provide a working knowledge of the fundamentals of business forecasting that can be applied in the real world regardless of firm size. We walk you through basic forecasting methodology, and then practical applications. It encompasses a wide range of topics of major importance to practical managers in all functional areas, including cash flow forecasting, cost prediction, earnings forecasts, bankruptcy prediction, foreign exchange forecasting, interest rate forecasting, and technological forecasting. Stress is placed on the use of computer technology, i.e., spreadsheets and stand-alone forecasting software. Completion Deadline & Exam: This course, including the examination, must be completed within one year of the date of purchase. In addition, unless otherwise indicated, no correct or incorrect feedback for any exam question will be provided. Course Level: Overview. This program is appropriate for professionals at all organizational levels. CPE Credits: 12 (CPA) Category: Finance Prerequisite: None Advanced Preparation: None Course Learning Objectives Chapter 1: Forecasting and Managerial Planning 1. Discuss how a forecast relates to managerial planning. 2. Identify who uses forecasts.

2 3. Explain the types of forecasts. 4. Discuss some special features of supply chain management forecasting. 5. Compare various forecasting methods and discuss how to select the right method. 6. Explain what is involved in the forecasting process. Chapter 2: Forecasting, Budgeting, and Business Valuation 1. Define budgeting. 2. Explain how important sales forecasts are to budgeting. 3. Diagram and explain the master budget interrelationships. 4. Follow the principal steps in preparing a master budget. 5. Prepare sales, production, and other budgets. 6. Prepare a budgeted income statement. 7. Cite the reasons for preparing the budgeted balance sheet. 8. Discuss how budgets aid in planning and control and how a computer-based approach may be used in the planning process. Chapter 3: Moving Averages and Smoothing Methods 1. Outline the special features of naive forecasting models. 2. Discuss how smoothing techniques work and state what circumstances they are most appropriate. 3. Explain the difference between moving averages and exponential smoothing. 4. Discuss why trend adjustment is necessary for exponential smoothing. Chapter 4: Regression Analysis 1. Define regression analysis. 2. Differentiate between simple regression and multiple regression. 3. Explain how the least-squares method works. 4. Demonstrate how to use a spreadsheet program such as Excel for regression analysis. 5. Describe the meaning of various regression statistics. 6. Illustrate the circumstances under which dummy variables and weights are used. Chapter 5: Multiple Regression 1. Discuss multiple regression.

3 2. Cite some examples of applications of multiple regression. 3. Demonstrate how to use computer software such as MINITAB, SPSS, and EXCEL 4. Explain statistics to look for multiple regression 5. Discuss nonlinear regression. 6. Explain how to use dummy variables. 7. Cite the reason why one uses weighted (or discounted) regression. Chapter 6: Time Series Analysis and Classical Decomposition 1. Define the time series. 2. Identify the four basic components of the time series data. 3. Explain, step by step, how to perform decomposition of time series. 4. Discuss time series analysis Chapter 7: Forecasting with No Data and Long Range Forecasting 1. Explain why most quantitative forecasting models do not work for new products. 2. Define the A-T-A-R concept. 3. Use the A-T-A-R model to forecast sales and profit on a new item. 4. List the types of long-range forecasts. 5. Compare popular growth models. 6. Discuss how to choose the right growth model. Chapter 8: Indirect Methods 1. Outline how to forecast sales with the Markov model. 2. Identify the types of indirect methods. 3. List the components that make up the Index of Leading Economic Indicators. 4. Explain input-output analysis. 5. Describe what is involved in market survey techniques. 6. Discuss the benefits of econometric modeling. Chapter 9: Evaluation of Forecasts 1. Define the cost of a prediction error. 2. Discuss the questions to be raised in connection with the data and the model.

4 3. Demonstrate how to measure accuracy of forecasts. 4. Explain the U statistic and turning point errors. 5. Monitor forecast errors to insure that the forecast is performing well. Chapter 10: What is the Right Forecasting Tool and Software For You 1. Define the term the life cycle of a new product. 2. Outline the four major stages. 3. Discuss some major criteria by which the forecasting model and software are evaluated. Chapter 11: Sales and Revenue Forecasting 1. State how critical sales forecasting is to policy formation. 2. Explain how economic forecasts, industry forecasts, and sales forecasts are interrelated. 3. Describe why some people are skeptical about the entire business forecasting. 4. Distinguish between short-term and long-term forecasts. 5. Give the reason what sales forecasting is a combined process. Chapter 12: Forecasting the Economy 1. Define barometric forecasting. 2. Explain the use of econometric models. 3. Discuss how input-output analysis can be used for economic forecasting. 4. Identify some sources of economic data 5. List some useful websites for economic data. Chapter 13: Financial and Earnings Forecasting 1. Apply the percent-of-sales method to determine the amount of external financing needed 2. Elaborate on the Certified Public Accountant's involvement and responsibility with prospective financial statements. 3. Describe briefly the types of engagements performed by the CPA. 4. Explain the implication of earnings forecasts. 5. Summarize EPS forecast confusion. 6. Compare security analysts vs. time-series models for earnings forecasting.

5 Chapter 14: Cash Flow Forecasting 1. Explain several methods of forecasting the cash collection pattern. 2. Estimate future cash collections from accounts receivable. 3. Establish an allowance for doubtful accounts. 4. Discuss how to manage accounts receivable. 5. Discuss how to find the right cash flow forecasting software available. Chapter 15: Analysis of Cost Behavior and Cost Prediction 1. Define and cite examples of variable costs, fixed costs, and mixed costs. 2. Distinguish between committed and discretionary fixed costs. 3. List the advantages and disadvantages of the high-low method for developing a cost-volume formula. 4. Develop a formula using the high-low method. 5. Develop a cost-volume formula using the least-squares method. Chapter 16: Bankruptcy Predictions 1. Discuss how a bankruptcy prediction model is useful and where. 2. Explain the Z-score model and how to classify the firm according to the model. 3. Compare three popular prediction models. 4. Build a spreadsheet model to see if your company is headed for financial trouble. Chapter 17: Forecasting Foreign Exchange Rates 1. Discuss the need for managers to forecast the foreign exchange rates. 2. Explain the relationship between exchange rates, interest rate, and inflation rate. 3. Compare the different types of forecasting techniques used to predict the foreign exchange rates. 4. Distinguish between the fundamental and technical methods of forecasting exchange rates. Chapter 18: Interest Rate Forecasting 1. Define various types of interest rates 2. Identify the factors that influence interest rates

6 3. Describe popular forecasting methodology for interest rates Chapter 19: Technological Forecasting 1. Explain how technological changes affect businesses 2. Discuss the accuracy of technological forecasting 3. Define the S-curve 4. List the types of forecasting models used for technological forecasting and briefly explain each Chapter 20: Forecasting in the 21 st Century 1. Name some of the changes expected for forecasting in the new millennium. 2. Identify how important what-if analysis is for policy formulation.