Financial Modeling
Forecast revenue and operating margin
What you will learn
Build a forecast from operating drivers and reconcile it to a disclosed base.
Forecast EBIT = forecast revenue × assumed EBIT margin
Start with reported segment revenue and a matching operating profit measure. Identify volume, price, mix and currency drivers. Estimate costs using activity and capacity assumptions. Keep the case consistent across revenue and costs, and compare the implied margin with the historical range and peer economics. A fictional IT supplier starts with ₹100 crore revenue. An assumed 8% increase and 20% EBIT margin yield ₹21.6 crore forecast EBIT.
A fictional IT supplier starts with ₹100 crore revenue. An assumed 8% increase and 20% EBIT margin yield ₹21.6 crore forecast EBIT.
Start with reported segment revenue and a matching operating profit measure. Identify volume, price, mix and currency drivers. Estimate costs using activity and capacity assumptions. Keep the case consistent across revenue and costs, and compare the implied margin with the historical range and peer economics. A fictional IT supplier starts with ₹100 crore revenue. An assumed 8% increase and 20% EBIT margin yield ₹21.6 crore forecast EBIT.
Which inputs should be compared when validating a segment forecast?