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Forecasting Financial Statements Using Risk Management Associates Industry Data

Author

Listed:
  • Terrance Jalbert
  • James E. Briley
  • Mercedes Jalbert

Abstract

Finance professionals must frequently forecast financial statements. The common practice for forecasting financial statements is to apply the percentage of sales method. In this paper, we develop a new method for forecasting financial statements based data available from The Risk Management Association. This method offers three advantages over the percentage of sales method. First, it specifies the appropriate percentages for each account using industry average data. Second, it allows the developer to use any figure in the income statement or balance sheet as a starting point. For example, an investor who knows only that they have $100,000 available to start a company can forecast a balance sheet and income statement. Third, the percentage of sales method applies only to the income statement, while the method developed here allows estimation of both the income statement and balance sheet. Statements produced using the technique presented here are easily defendable to skeptical bankers.

Suggested Citation

  • Terrance Jalbert & James E. Briley & Mercedes Jalbert, 2012. "Forecasting Financial Statements Using Risk Management Associates Industry Data," Business Education and Accreditation, The Institute for Business and Finance Research, vol. 4(1), pages 123-134.
    • Handle: RePEc:ibf:beaccr:v:4:y:2012:i:1:p:123-134
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    More about this item

    Keywords

    Forecasting; Banking; Entrepreneurship;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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