Learning Outcome Statements

1. Income statement modeling: revenue

a. compare top-down, bottom-up, and hybrid approaches for developing inputs to equity valuation models;

b. compare "growth relative to GDP growth" and "market growth and market share" approaches to forecasting revenue;

2. Income statement modeling: operating costs and non-operating costs

c. evaluate whether economies of scale are present in an industry by analyzing operating margins and sales levels;

d. forecast the following costs: cost of goods sold, selling general and administrative costs, financing costs, and income taxes;

3. Balance sheet and cash flow statement modeling

e. describe approaches to balance sheet modeling;

f. describe the relationship between return on invested capital and competitive advantage;

4. The impact of competitive factors on prices and costs

g. explain how competitive factors affect prices and costs;

h. judge the competitive position of a company based on a Porter's five forces analysis;

5. Inflation and deflation

i. explain how to forecast industry and company sales and costs when they are subject to price inflation or deflation;

6. Technological developments

j. evaluate the effects of technological developments on demand, selling prices, costs, and margins;

7. Long-term forecasting

k. explain considerations in the choice of an explicit forecast horizon;

l. explain an analyst's choices in developing projections beyond the short-term forecast horizon;

m. demonstrate the development of a sales-based pro forma company model.