ABSTRACT
Our discussion will focus on a nancial statement model that is driven by a sales forecast. e sales forecast is the primary input that drives the model, and the model allows us to explore the investment and nancing necessary to meet the sales forecast. We can think of the model as being structured in modules, or blocks of equations, with a module for each of the following tasks:
Accounting•
Income generation•
Investment•
Financing.•
Exhibit 4.1 describes the ow between the modules. e income generation module utilizes the economic forecasts, decision speci cations, and parameter estimates to generate estimates of revenues and costs that are input to the accounting module, which, in turn, generates trial values for the various accounts of the nancial statements. ose trial values are used by the investment and nancing modules to calculate the amount of new investment in assets necessary to support the forecast level of sales and the amount and form of new nancing necessary to purchase these assets.
