Objectives Budgeting – Course Note – Jiexin Tan
Search
Essays
Sign up
Sign in
Contact us
Tweet
Index
/Business
Objectives Budgeting
Objectives BudgetingTo build a forcasted P&L for the next 3 years.To forecast the earnings per share for the next 3 years.To build 3 scenarios: Base / Optimistic / PessimisticMethodology        Start with the RevenuesAnalyse the revenue growth in the last three yearsIdentify the revenue guidance/strategy communicated by the companyCompare the previous guidance provided by the company with the actual results and define if the guidance tend to be accurate, too optimistic or too pessimisticIdentify revenue drivers (macro + micro)Build your main assumptions and explain themThen budget the expensesAnalyze the main expense items as a % of revenues in the last three years.Identify the cost/margin/EPS guidance communicated by the companyCompare the previous guidance provided by the company with the actual results and define if the guidance tend to be accurate, too optimistic or too pessimisticBuild your main assumptions (expenses as % of revenues) for each expense item over the next three years and explain your rationale.Define the EPS and check the company’s valuationDivide the forecasted net income by the number of outstanding shares of the company to find your forecasted EPS.Do this for your 3 scenarios: base / optimistic / pessimisticCalculate the actual P/E (price/earning) ratio of the company = actual share price / last 12 months EPSCalculate the forecasted P/E = actual share price / your next 12 months forecasted EPSCompare (c.) and (d.) and conclude on whether the stock is a BUY or a SELL based on your assumptions. Market pricing P/E ratios are commonly used by investors for relative valuation purposes. Everything else being equal, the lower the P/E the cheaper the stock.Relative valuation can be dangerous as it does not account for the specificities of the company. Weak balance sheet raise more risks Poor corporate governance may impair s/h valueLitigation, quality of products, lifecycle stage, degree of competitive advantage, etc
Continue for 1 more page »
Read full document
Download as (for upgraded members)
Citation Generator
MLA 7
CHICAGO
(2016, 04). Objectives Budgeting. EssaysForStudent.com. Retrieved 04, 2016, from
“Objectives Budgeting” EssaysForStudent.com. 04 2016. 2016. 04 2016 <
"Objectives Budgeting." EssaysForStudent.com. EssaysForStudent.com, 04 2016. Web. 04 2016. <
"Objectives Budgeting." EssaysForStudent.com. 04, 2016. Accessed 04, 2016.
Essay Preview
By: Jiexin Tan
Submitted: April 20, 2016
Essay Length: 426 Words / 2 Pages
Paper type: Course Note Views: 391
Report this essay
Tweet
Related Essays
U.S. Budget Deficit - Good or Bad?
U.S. Budget Deficit - Good or Bad? "Spending financed not by current tax receipts, but by borrowing or drawing upon past tax reserves." , Is
1,626 Words  |  7 Pages
Budgeting
Budgeting is the systematic method of allocating financial, physical, and human resources to achieve an organization’s strategic goals. Budgets are utilized by for-profit and non-profit
814 Words  |  4 Pages
Budget Work File
Budget Series Work File Please answer all of the following questions as you work through the Budget Series. Do not submit your work file until
1,036 Words  |  5 Pages
Capital Budgeting Techniques
Capital Budgeting Technique MGMT-3004-04 Financial Management Capital Budgeting Techniques Capital budgeting is one of the most important decisions that face a financial manager. There
1,523 Words  |  7 Pages
Similar Topics
Budgeting Business Organization
Australian Federal Budget
Get Access to 89,000+ Essays and Term Papers
Join 209,000+ Other Students
High Quality Essays and Documents
Sign up
© 2008–2020 EssaysForStudent.comFree Essays, Book Reports, Term Papers and Research Papers
Essays
Sign up
Sign in
Contact us
Site Map
Privacy Policy
Terms of Service
Facebook
Twitter