Financial Modelling and forecasting Essay Example | Topics and Well Written Essays - 1000 words

Financial Modelling and forecasting - Essay ExampleThey are used for propose of measuring the performance of the firm and in any case to stripe hoe stable is a firm financially. They are also used for future planning, determining whether a firm is able to borrow loans and service them, and also evaluating the performance of the firm under different models. Most models are meniald on sales volumeThis paper will seek to lose it the financial statement of JB Hi-Fi by use of historical data to predict the future.I will therefore forecast the years 2013, 2014 and 2015 using the year 2012 as my base year. Ratio compendium of relevant sales ratios will be used for the analysis.Financial statement analysis is the use balance sheet and income statement data to come up with values for financial interpretation and identification of the strengths and weaknesses of an organization (Stickney et al., 2006). Various techniques of financial statement analysis are trend analysis, comparative st atements, third estate size percentages, ratio and fund analysis as well as changes in working capital changes (Libby et al., 2004). For the purpose of analyzing JB Hi-Fi, relevant sales ratio analysis will be undertaken.For a successful financial analysis, comparison has to be made using consistent percentages through the years of analysis. The use of the sales ratios to analyze the years will reveal their similarities, trends, as well as differences in the company (Palepu & Healy, 2007). As Gregory (2008) notes, the stakeholders of the information contained in a financial statement include, effectiveness investors, creditors, managers, shareholders, the government and creditors and they require the information for different reasons.Use of historical data is a major limitation of ratio analysis as it is therefore presume that it reflects on the future trends whereas no one could be certain of the future (Palepu & Healy, 2007). Resvine et al (2004) explains that another limitatio n of using financial statements in analysis is that generally accepted accounting principles allows