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Michael Samonas
Financial Forecasting, Analysis, and Modelling
Financial Forecasting, Analysis, and Modelling
A Framework for Long-Term Forecasting
MICHAEL SAMONAS
This edition first published 2015
© 2015 Michael Samonas
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Library of Congress Cataloging-in-Publication Data
Samonas, Michael.
Financial forecasting, analysis, and modelling: a framework for long-term forecasting / Michael Samonas.
pages cm
Includes bibliographical references and index.
ISBN 978-1-118-92108-1 (cloth)
1. Corporations-Finance-Mathematical models. 2. Corporations-Finance-Forecasting. I. Title.
HG4012.S26 2015
658.1501'12-dc23
2014040071
Cover Design: Wiley
Cover Image: Top:©iStock.com/MarsBars;
Bottom: ©iStock.com/studiocasper
Preface
Over the past several years, spreadsheet models have been the dominant vehicles for finance professionals to implement their financial knowledge. Moreover, in the aftermath of the recent financial crisis the need for experienced Financial Modelling professionals has steadily increased as organizations need to plan and adjust to the economic volatility and uncertainty. The level of risk in taking certain decisions needs to be projected using proper financial models and the alternative possible outcomes need to be analyzed. One benefit of this type of analysis is that it helps companies to be proactive instead of reactive. They can avoid or at least mitigate potential negative results that may stem from influences in their industry or within the business itself.
This book provides a step-by-step guide that takes the reader through the entire process of developing long-term projection plans using Excel. In addition, by making use of various tools (Excel's Scenario Manager, sensitivity analysis, and Monte Carlo simulation) it provides practical examples on how to apply risk and uncertainty to these projection plans. Although these projections are not guarantees they can help organizations to be better informed, and thereby provide peace of mind.
Financial Forecasting, Analysis and Modelling: A Framework for Long-Term Forecasting covers financial models in the area of financial statement simulation. It provides clear and concise explanations in each case for the implementation of the models using Excel. It is relevant to a variety of situations. At the most fundamental level, it can help:
○ Project a company's financial performance;
○ Forecast future cash flows and perform a DCF valuation;
○ Present the good, basic, and bad scenarios of the evolution of the company's debt covenants.
At a more advanced level it ensures that the financial analyst or decision-maker is properly informed and comfortable when called to decide the following types of question:
○ What will be the double impact on the liquidity of the organization of a simultaneous increase of 35 % in turnover and a decrease of 10 days in the credit period provided to clients?
○ What will be the range of the company's net debt at a 95 % confidence level based on selected assumptions?
Acknowledgments
I owe a debt of gratitude to many individuals who helped me with this book. Foremost is my wife Eleftheria for the support and encouragement she provided to me. Furthermore, I would like to thank my parents for their tireless efforts to support me in every step of my life. Their determination and drive have been a constant inspiration. My special thanks go to Nikos Karanikolas, a magnanimous reviewer, who provided detailed written suggestions in a response to the publisher's request for his review. Also I really appreciate the insightful comments of my esteemed colleague Carmen Mihaela Bulau on many of my manuscripts in spite of her hectic schedule.
Finally, I appreciate the efforts of all the people at John Wiley & Sons who have helped make this book happen. In particular I would like to thank Werner Coetzee (Commissioning Editor), Jennie Kitchin (Assistant Editor), Caroline Quinnell (Copy Editor), and last but not least Kelly Cracknell and Abirami Srikandan – Hoboken (Production Editors), who guided me through the production process.
About the Author
Michael Samonas is a finance professional with extensive experience in Financial Planning, Analysis and Modelling. He is currently the Group CFO of SIDMA S.A., a member of the Viohalco Group of companies. He has worked in the past for various multinationals including Vodafone S.A. and the Hellenic Telecommunications Organization conducting a range of models for business planning, valuations, mergers, projects, and data analysis. For a number of years Michael was an instructor at the School of Business & Economics of the University of Laverne, Athens Campus. A regular contributor to financial and business journals, Michael has taught specialized courses in Financial Analysis & Business Modelling, Credit Analysis & Cash Flow Forecasting, and Investment Evaluation & Appraisal.
Michael holds both MSc and PhD degrees from the Department of Physics and the Electronic & Electrical Engineering Department of University of Surrey as well as an MBA from the University of La Verne California. He also holds a BSc degree in Applied Accounting from University of Oxford Brookes (with honours) and is a Fellow of the Association of Chartered Certified Accountants (ACCA).
Part One
Developing