Forecasting Financial Statements Using Risk Management Associates Industry Data

Business Education and Accreditation, Vol. 4, No. 1, pp. 123-134, 2012

12 Pages Posted: 26 Feb 2012 Last revised: 1 Apr 2012

See all articles by Terrance Jalbert

Terrance Jalbert

University of Hawaii - Department of Business Administration

James E. Briley

Northeastern State University

Mercedes Jalbert

The Institute for Business and Finance Research

Date Written: February 25, 2012

Abstract

Finance professionals must frequently forecast financial statements. The common practice for forecasting financial statements is to apply the percentage of sales method. In this paper, we develop a new method for forecasting financial statements based data available from The Risk Management Association. This method offers three advantages over the percentage of sales method. First, it specifies the appropriate percentages for each account using industry average data. Second, it allows the developer to use any figure in the income statement or balance sheet as a starting point. For example, an investor who knows only that they have $100,000 available to start a company can forecast a balance sheet and income statement. Third, the percentage of sales method applies only to the income statement, while the method developed here allows estimation of both the income statement and balance sheet. Statements produced using the technique presented here are easily defendable to skeptical bankers.

Keywords: Financial Statements, RMA, Forecasting, Banking, Entrepreneurship

JEL Classification: A22, A23, C52, C53, C58

Suggested Citation

Jalbert, Terrance and Briley, James E. and Jalbert, Mercedes, Forecasting Financial Statements Using Risk Management Associates Industry Data (February 25, 2012). Business Education and Accreditation, Vol. 4, No. 1, pp. 123-134, 2012, Available at SSRN: https://ssrn.com/abstract=2011162

Terrance Jalbert (Contact Author)

University of Hawaii - Department of Business Administration ( email )

808-974-7456 (Phone)

James E. Briley

Northeastern State University ( email )

Tahlequah, OK 74464-2304
United States

Mercedes Jalbert

The Institute for Business and Finance Research ( email )

P.O. Box 5569
Hilo, HI 96720
United States

HOME PAGE: http://www.theIBFR.com

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