ECON 1 Lecture Notes - Lecture 19: Nopat, Income Statement, Working Capital
Document Summary
Prospective analysis: fourth and final step of fs analysis, which focuses on forecasting a firm"s future financial performance position. The forecasts can be used for various purposes, such as estimating firm value or assessing creditworthiness. Comprehensive forecasting approach: forecasting of the income statement, balance sheet, and cash flow statement to make sure that the performance forecast does not imbed unreasonable assumptions about future asset turnover, leverage, or equity changes. Condensed financial statement: a condensed fs consist of the income statement, balance sheet and cash flow statement. The focused is put on condensed fs instead of detailed fs because: (1) the approach involves making a relatively small set of assumptions about the future of the firm. A detailed line item forecast is likely to be very tedious; and (2) condensed fs are all that are needed for analysis and decision making. We start with a bs at the beginning of the forecasting period.
