Better Forecasting by Projecting Ranges of Outcomes (Video) (Course Id 2538)

• Who is this course for?
  This course is designed for anyone needing Continuing Professional Education (CPE), particularly CPAs, accountants, and financial professionals seeking to enhance their forecasting skills.

• What is this course about or what problem does this course solve?
  The course addresses the limitations of traditional forecasting by teaching how to project ranges of outcomes using probabilistic analysis, providing a more complete understanding of financial uncertainty and risk.

• How can the knowledge from this course be used?
  Learners can apply the concepts of probability analysis, distribution curves, S-curves, and Monte Carlo simulations to create more robust and insightful financial projections.

• Why is this course important to a CPA, Accountant, or IRS Enrolled Agent?
  It helps professionals integrate statistical thinking into financial analysis, which is essential for managing uncertainty and making better-informed business decisions.

• When is this course relevant or timely?
  This course is especially timely for professionals preparing budgets and forecasts where future conditions are uncertain or volatile, and where understanding risk is critical.

• How is a course like this consumed or used?
  This self-study video course is completed online, includes review and final exam questions, and must be passed with a minimum score of 70% to earn 1.0 CPE credit.

This course provides a practical framework for incorporating probability analysis into your financial projections, equipping you with the tools and techniques to make more informed and robust financial forecasts. By incorporating probability analysis into your financial projections, you can better understand and manage risk to make more informed decisions.

Accounting is the language of business. Statistics is the language of uncertainty and risk. Financial analysts and decision-makers must speak both accounting and statistics; otherwise, we ignore uncertainty and risk.

This is a very high-level overview of probabilistic analysis. I'll focus more on concepts than calculations. My hope is that these concepts improve your company's understanding and measurement of uncertainty so that you can make better decisions.

In most forecasts and budgets, great effort is spent on determining the "right input number" or a few "right numbers" for the projection model. The assumption is that if we get the right inputs, we'll get the right output. In stochastic analysis, the model inputs are a range of numbers with assumptions about how those numbers are distributed throughout that range. Projections that provide ranges of outcomes and probabilities of those outcomes give us a much more complete picture of an uncertain and risky future.

The first lesson explores the benefits of probabilistic analysis. The second lesson briefly covers a few basic statistics concepts. We'll then look at S-curves and flying bars. These are ways to display a range of data. Next is an overview of Monte Carlo simulation. We'll then explore the implementation process for simulation analysis.

Video - NASBA QAS - Text - NASBA Registry - 2538

Course Learning Objectives

• Recall the definitions of possibility and probability
• Identify key aspects of distribution curves and flying bar charts
• Recognize methods and tools for probabilistic modeling

Chapter 1 - Better Forecasting by Projecting Ranges of Outcomes

Chapter 1 Review Questions

Glossary