Professional Documents
Culture Documents
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Forecasting operating expenses
Operating expenses (COGS and SG&A) tend to be have a
stable relationship with revenues. These items tend to be
forecast as a % of revenue
An exception will be if COGS has volatile components such as fuel or
commodities (metals, agricultural products) that account for volatility
in COGS. In these cases, you want to make adjustments depending on
the forecasts for these inputs. Your companys 10-K will be a good
starting point to find this out.
If R&D or marketing is an important activity within your company, and
if you have separate information to forecast these items, you should
try to do it.
You should make adjustments to incorporate new information about
the company. Examples include new financial information from the
latest 10-Q, 10-K, or 8-K; new equipment that will make production
more efficient and/or cheaper; new acquisitions that will change
production processes; new information about their competitor/s
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Forecasting operating expenses (continued)
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Forecasting other/non-recurring expenses and income
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Forecasting shares outstanding
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Forecasting interest expense
Will depend on two things:
The forecast size (in terms of total assets) of your company
the future capital structure of your company. To figure this out you will
need information on
What the company says about debt (are they going to issue more debt? Are they
going to pay down debt?)
New share issuances
Share repurchases
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Forecasting depreciation and amortization