In order to generate automatic assumptions and perform a forecast, we apply statistical techniques to the company's historical data. If there are only two periods of historical data, we perform a simple trend analysis.
Example:
Using historical values for sales from 2018 and 2019, what is the predicted value for sales in 2020?12/15/2020 12/15/2019 12/15/2018 Sales $8 $5 $3
Since there are only 2 periods of historical data, we perform a simple trend analysis:
Predicted % Change = ($5 - $3) / $3 = 66.66%
Predicted 2005 Sales = $5 * 1.66 = $8.3
If there are three or more periods of historical data, we use a combination of Ordinary Least Squares regression, Simple Exponential Smoothing, and Holt-Winters Exponential Smoothing models to perform the forecast. The following table lists each account with its corresponding method of prediction:
| Account | Prediction Algorithm |
| Sales | Holt-Winters Exponential Smoothing |
| Cost of Sales | Calculated |
| Gross Profits | Calculated |
| Gross Profit Margin | Exponential Smoothing |
| Depreciation and Amortization | Percentage of Gross Fixed Assets |
| Interest Expense | Calculated using Loan Information |
| Other Overhead or S,G,&A Expense | Holt-Winters Exponential Smoothing |
| Other Operating Expenses | Fixed (not predicted) |
| Net Profit before Taxes | Calculated |
| Adjusted Owner's Compensation | Most recent historical value |
| Adjusted Net Profit before Taxes | Calculated |
| Taxes Paid | Percentage of NPBT |
| Other Income | Fixed (not predicted) |
| Other Expenses | Fixed (not predicted) |
| Net Income | Calculated |
| Cash | Calculated (see below for more information) |
| Accounts Receivable | Exponential Smoothing on Accounts Receivable Days |
| Inventory | Exponential Smoothing on Inventory Days |
| Other Current Assets | Holt-Winters Exponential Smoothing |
| Total Current Assets | Calculated |
| Gross Fixed Assets | Holt-Winters Exponential Smoothing |
| Accumulated Depreciation | Most recent historical value + predicted Depreciation |
| Net Fixed Assets | Calculated |
| Other Assets | Holt-Winters Exponential Smoothing |
| Total Assets | Calculated |
| Accounts Payable | Exponential Smoothing on Accounts Payable Days |
| Short Term Debt | Calculated using Loan Information |
| Current Portion of Long Term Debt | Calculated using Loan Information |
| Other Current Liabilities | Holt-Winters Exponential Smoothing |
| Total Current Liabilities | Calculated |
| Senior Debt | Calculated using Loan Information |
| Subordinated Debt | Calculated using Loan Information |
| Other Long Term Liabilities | Calculated using Loan Information |
| Long Term Liabilities | Calculated |
| Total Liabilities | Calculated |
| Retained Earnings | Most recent historical value + predicted Net Income |
| Total Equity | Calculated |