From the course: Finance and Accounting Tips

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Forecasting financial statements

Forecasting financial statements

From the course: Finance and Accounting Tips

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Forecasting financial statements

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- A common criticism I hear about accounting is that it's too focused on the past, it's about the financial history of a company. Well, managers and investors don't want to know about the past, they want to know about the future, and accounting leans too heavily on the past. - I'm going to go with Winston Churchill on this topic. He said, "The farther back you can look, "the further forward you are likely to see." Churchill, a student of history, understood that studying the past allowed one an educated glimpse into the uncertain future. - Studying and analyzing the historical performance of a company allows financial statement users to project the future performance of a company. We make some reasonable assumptions about a company's future performance and it is fairly straightforward to see what future financial statements might look like. - So, let's discuss forecasting a company's income statement. But the same concepts would apply if we were looking at the balance sheet. To begin,…

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