{"id":37360,"date":"2016-11-05T14:33:56","date_gmt":"2016-11-05T09:03:56","guid":{"rendered":"https:\/\/staging-imarticus.kinsta.cloud\/?p=37360"},"modified":"2024-05-14T09:54:34","modified_gmt":"2024-05-14T09:54:34","slug":"fundamentals-forecasting-basic-modeling-hygiene-iii","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/fundamentals-forecasting-basic-modeling-hygiene-iii\/","title":{"rendered":"Fundamentals of Forecasting \u2013 Basic Modeling Hygiene - III"},"content":{"rendered":"

By Reshma Krishnan
\nWe are continuing to understand the Fundamentals of Forecasting. Please click here for Part 1 <\/a>and Part 2.
\nMany aspiring candidates ask us what is so special about the FMVC program at Imarticus Learning<\/em><\/a>. After all, shouldn't an MBA suffice? The problem with MBA\u2019s, regardless of which school you go to, is that they don\u2019t teach you role specific issues. For instance, they don\u2019t have specific modeling modules. They will have a forecasting module but they won\u2019t teach you how to model or how to forecast step by step. In the Financial Modelling and Valuation Course<\/a> (FMVC), India\u2019s leading Forecasting and Financial Modeling program, we teach you the minutae and we go into specifics. One such specific is modeling and forecasting hygiene.
\nHard Coding- the model users bane. <\/strong>
\nThis is the first thing I teach in modeling class. Hard Coding is essentially a stand alone number in a cell, which has no back up. It says nothing about the number. You must never hard code a forecasted number because the forecast is always done on the back of an assumption, which has to be modeled in. Hard coded numbers are usually past data, actual data that has been verified and been the result of auditing. A forecasted number should always be a linked number from an assumption.
\nColour Coding<\/strong>
\nStaying with hard coded numbers, it always helps to colour code. In fact, in my class, I mark an assignment zero if it is not colour coded. Red hardcoded number tells me that the forecaster had no option but to hard code. All actuals should be in a different colour to forecasts and all delta numbers, that is the variable you are using to arrive at a forecast needs to also be in a different number.
\nGive the delta its own cell <\/strong>
\nLet\u2019s say you want to increase the sale of pencils in 2017 by 10% from 2016. You have two ways to do it.
\n=(2016 revenue cell) x 10% +(2016 revenue cell) = 2017 revenue.
\nOr
\nYou create a special cell for 10%
\n= ((2016 revenue cell) x (10% cell) )+(2016 revenue cell) = 2017 revenue.
\nHere I am assuming that revenue is growing by 10% . This helps me change the delta as I see fit which then changes my model. The delta is the rational for my model. If you hide it within a formula, I have to constantly look at formulas to find my assumptions.
\nLearn more about Forecasting by joining our course, FMVC,Financial Modeling and Valuation Course, India\u2019s leading program in Financial Modeling and Valuation and focused on improving your chances on having a career in Investment Banking<\/a> or Equity Research.<\/p>\n

\n

\n","protected":false},"excerpt":{"rendered":"

By Reshma Krishnan We are continuing to understand the Fundamentals of Forecasting. Please click here for Part 1 and 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