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Financial Forecasting 1

This document introduces financial forecasting using Python. It discusses how financial statements provide important metrics for forecasting and structure for solid financial analysis. The income statement specifically shows gross profit from direct sales and costs, and net profit after considering indirect expenses. Calculating sales involves data on price and units sold, while calculating cost of goods sold requires data on fixed, variable and inventory costs. Analyzing gross profit margin provides insight into core product profitability and the break-even point. The document demonstrates obtaining a real dataset and filtering it in Python to choose metrics of interest.

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Luca Farina
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65 views20 pages

Financial Forecasting 1

This document introduces financial forecasting using Python. It discusses how financial statements provide important metrics for forecasting and structure for solid financial analysis. The income statement specifically shows gross profit from direct sales and costs, and net profit after considering indirect expenses. Calculating sales involves data on price and units sold, while calculating cost of goods sold requires data on fixed, variable and inventory costs. Analyzing gross profit margin provides insight into core product profitability and the break-even point. The document demonstrates obtaining a real dataset and filtering it in Python to choose metrics of interest.

Uploaded by

Luca Farina
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Introduction to

nancial statements
F IN AN CIAL F ORECAS TIN G IN P YTH ON

Victoria Clark
CGMA Financial Analyst
About this course
Analyze data in a simple way

Using Python

Model different sources of data

Financial forecasting basics

FINANCIAL FORECASTING IN PYTHON


Financial statements, an introduction
Records of nancial information

Universal format and clear structure

Used for decision making

Important metrics for forecasting

FINANCIAL FORECASTING IN PYTHON


Types of nancial statements

FINANCIAL FORECASTING IN PYTHON


How nancial statements are used in forecasting
    

Build on the important metrics

Shows nancial health of a company

Provides structure for solid nancial


        forecasting

FINANCIAL FORECASTING IN PYTHON


The income statement \ pro t & loss statement
  Two important elements:  

Gross Pro t: DIRECT sales and costs

Net Pro t: INDIRECT income and expenses

FINANCIAL FORECASTING IN PYTHON


Gross pro t
DIRECT sales and costs

cogs = material_costs +
direct_labor_costs +
factory_costs

gross_profit = sales - cogs

FINANCIAL FORECASTING IN PYTHON


Net pro t
INDIRECT income and expenses

opex = insurance +
admin_sales +
r_d +
training_cost +
other_non_direct_costs

net_profit = gross_profit - opex

FINANCIAL FORECASTING IN PYTHON


Let's practice!
F IN AN CIAL F ORECAS TIN G IN P YTH ON
Calculating sales and
the cost of goods
sold
F IN AN CIAL F ORECAS TIN G IN P YTH ON

Victoria Clark
CGMA Financial Analyst
Calculating sales and the cost of goods sold

FINANCIAL FORECASTING IN PYTHON


Calculating sales
Sales = Income = Revenue = Turnover  

Data needed:

Sales price per unit sp_unit

Number of units sold units

Complexities

Discounts (Discounted Sales Price) d_sp

Credit sales

Sales mix sp_1 vs sp_2

FINANCIAL FORECASTING IN PYTHON


Calculating Cost of Goods Sold (COGS)
Data needed:   

fixed_costs
Costs independent of units

Variable_costs_per_unit
Costs incurred per unit produced

Inventory opening balance inv_ob

Inventory closing balance inv_cb

FINANCIAL FORECASTING IN PYTHON


What does the gross pro t tell us?
Pro t margin (%)
gp_margin

Analyze the pro tability of our core product

Calculate the break even point

break_even = fixed_costs/(sp - variable_costs)

FINANCIAL FORECASTING IN PYTHON


Let's practice!
F IN AN CIAL F ORECAS TIN G IN P YTH ON
Working with raw
datasets
F IN AN CIAL F ORECAS TIN G IN P YTH ON

Victoria Clark
CGMA Financial Analyst
Obtaining a dataset for forecasting
Tesla Motors Inc.

Historic information publicly available

Income statement as .csv

FINANCIAL FORECASTING IN PYTHON


First look

FINANCIAL FORECASTING IN PYTHON


Filtering the data in Python
# Choose some interesting metrics
interesting_metrics = ['Gross profit', 'Net income']

# Using the .isin() method, filter for rows containing these metrics
filter = income_statement.metric.isin(interesting_metrics)
filtered_income_statement = income_statement[filter]

print(filtered_income_statement)

FINANCIAL FORECASTING IN PYTHON


Let's practice!
F IN AN CIAL F ORECAS TIN G IN P YTH ON

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