Forecasting Income Statement
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?
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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