Video: Forecasting and Projection Overview and Objectives

In this lesson, Nick Palazzolo, CPA, unpacks the intricacies of forecasting and projection, delving deeper than the basic concepts of budgeting. He emphasizes the significance of this topic for both simulation and multiple-choice questions within the CPA exam and explains complex analytical methods such as cost-volume-profit and sensitivity analysis. Nick aims to demystify these concepts by delineating learning objectives centered on utilizing forecasting techniques for revenue growth and cost and expense characteristics. He also commits to simplifying the processes needed for the planning process metrics calculation, including various types of analyses crucial for effective decision-making. To wrap up, Nick assures a clear-cut and understandable breakdown of ratio and regression analysis, promising a seamless learning experience without the confusion that often accompanies these challenging topics.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Hey, everyone. Welcome to the all-too-critical and important section of forecasting and projection. Now, we've seen budgets. We've seen how we do want to project for the future, right? You make a budget. That's what a budget is. Where this goes much more in depth. This is heavy sim and multiple choice question territory. If you are familiar with cost-volume-profit analysis, also known as break-even analysis, scenario analysis, different questions based on those predicting what could go on in the future. Sensitivity analysis, lots of important points, contribution margin, list goes on and on.

Let's dive into some of those learning objectives so we know what we have in store for us. All right, so we want to use forecasting and projection techniques to model revenue growth, cost, and expense characteristics, or profitability and others. We also want to prepare and calculate metrics to be utilized in the planning process, such as cost-benefit analysis, sensitivity analysis, break-even analysis, and decision making. Lots of decision making. Did we choose one or the other? Should we change one thing? What happens if we change one thing? How will that affect the whole business? We'll go into that much more in depth as we go on and proceed with this lesson.

Lastly, we want to analyze the results of forecasts and projections using ratio analysis and explanations of correlations or variations from key financial indices. We are going to see regression analysis, R-squared, all of those. I'm going to dissect it into digestible bite-size pieces so it makes sense to you. Not confusing at all because that's the last thing I want. I was confused like hell when I was taking this test. That's not going to happen with you. We're going to make this nice and concise.

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