When forecasting the income statement, would you forecast the line items or would you forecast the margins? For example, is it more appropriate to forecast R&D and SG&A expense or would I forecast the Operating Margin? In addition, what is the most appropriate way to forecast Goodwill on the balance sheet?
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In response to your first question, it would be more appropriate to forecast each line item (R&D, SG&A, etc.). To your second question, it is difficult to forecast Goodwill since you would be assuming the amount a company would pay over the fair market value for future acquisitions. Therefore, you would probably just leave goodwill the same as your base year when forecasting.
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