From the course: Excel: Learning Cash Flow Forecasting
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Building assumptions about future performance
From the course: Excel: Learning Cash Flow Forecasting
Building assumptions about future performance
- [Instructor] A cashflow forecast is only as good as the assumptions behind it. Now that we've addressed how historical, financial, and non-financial data provides a foundation, let's talk about how we can predict the future, more accurately, with insight, judgment, and critical thinking. And let's do so with a real life example about revenue and the related cash flows. Imagine that you asked the controller for the last three years of P&Ls. The historical P&Ls show that the company exhibited about a 25% annual growth rate over this time. Now, should you assume the same trend of 25% is going to continue? Well, not necessarily. So what intelligence from information requests would help you? For one, we'd want to ask the sales manager for her unit forecast broken down by market, corporate, retail, and e-commerce. What is happening in each one of those channels? It might be helpful to know whether regional economies are growing or shrinking. What's the impact of inflation or interest…
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