Prospective Analysis-Forecasting Flashcards
1
Q
Prospective analysis
A
> Valuation
>Forecasting
2
Q
Forecasting
A
> summarises what has been learnt though business strategy analysis, acc analysis and financial analysis > Behaviour of sales growth > behaviour of earnings >Behaviour of return on equity > Forecasting sales
3
Q
Behaviour of sales growth
A
sales growth tends to be mean-reverting
4
Q
Behaviour of earnings
A
last earnings are a good starting point for assessing future earnings
5
Q
Behaviour of ROE
A
ROE is characterised as mean-reverting firms above or below average ROE tend to revert to normal levels
6
Q
Forecasting sales
A
not generally accepted, should be tailored to the context and factors considered in prior analysis
7
Q
Sensitivity analysis
A
What if sales don’t grow as expected, profit margins deteriorate
