Key Terms
Build order
1. Sales forecast (already done) 2.
Example
If recession causes sales to drop to 60% of forecasted level, net income drops significantly. Excel formulas that link v
Purpose
Identify which variables matter most. If a 10% change in COGS wipes out profit but a 10% change in rent barely moves the
Balance sheet
Shows assets, liabilities, and equity at a single point in time.
Cash deficit
Cash outflows exceed cash inflows in a period.
Cash forecast
Projects future cash inflows and outflows to identify surpluses and deficits.
Cash surplus
Cash inflows exceed cash outflows in a period.
Common-size
Every line item expressed as a percentage of a base amount (sales or total assets).
Financing activities
Cash transactions on the statement of cash flows related to funded/financed activities.
Forecast
Estimate of future financial performance based on historical data and contextual information.
Income statement
Measures financial performance over a period of time.
Investing activities
Cash transactions related to acquisition or disposal of long-term assets.
Operating activities
Cash transactions related to daily operations.
Pro forma
Forward-looking; forecasted financial statements.
Scenario analysis
Examining how different situations (economy, competition, etc.) would affect the overall forecast.