A Quick & Dirty Method for Estimating Growth and Price Changes for Forecasting Financial Statements

Abstract

In this teaching note we show a dirty and quick approach to extract relevant information from historical financial data for forecasting financial statements. We make extensive use of the Fisher Equation and find three components that affect the growth of sales and other items in dollars. These components are change in quantities, change in real prices and inflation rate. Once we estimate the first two inputs we incorporate in the analysis an inflation forecast. The combination of the three components allows us to estimate the growth and construct the forecast.

Keywords: Accounting, financial management, financial statements, balance sheet, Income Statement, financial ratios, forecasting

JEL Classification: M41, G29