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Chapter 2

This document discusses financial forecasting in Python. It introduces balance sheets and their key components - assets, liabilities, and equity. Assets are economic resources that can generate money, while liabilities are economic obligations usually to pay something. Equity is calculated as assets minus liabilities and represents the owner's interest. The document then discusses various financial ratios that can be calculated from a balance sheet, including debtor days, days payable outstanding, days in inventory, and asset turnover ratio. These ratios help analyze the efficiency and health of a company's finances.

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76 views19 pages

Chapter 2

This document discusses financial forecasting in Python. It introduces balance sheets and their key components - assets, liabilities, and equity. Assets are economic resources that can generate money, while liabilities are economic obligations usually to pay something. Equity is calculated as assets minus liabilities and represents the owner's interest. The document then discusses various financial ratios that can be calculated from a balance sheet, including debtor days, days payable outstanding, days in inventory, and asset turnover ratio. These ratios help analyze the efficiency and health of a company's finances.

Uploaded by

debojyoti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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DataCamp Financial Forecasting in Python

FINANCIAL FORECASTING IN PYTHON

Introduction to the balance


sheet

Victoria Clark
CGMA Financial Analyst
DataCamp Financial Forecasting in Python

Types of financial statements


DataCamp Financial Forecasting in Python

Assets and liabilities

Asset = Economic Resource

Can be used to make money

Liability = Economic Obligation

Usually the obligation to pay


something
DataCamp Financial Forecasting in Python

Equity
equity = assets - liabilities

Equity: portion of owner's interest in a


property or business

# House example

house_cost = 100000

down_payment = 20000

mortgage = 80000

tot_equity = house_cost - mortgage

# Balance sheet
owners_equity = assets - liabilities
DataCamp Financial Forecasting in Python
DataCamp Financial Forecasting in Python
DataCamp Financial Forecasting in Python
DataCamp Financial Forecasting in Python
DataCamp Financial Forecasting in Python

FINANCIAL FORECASTING IN PYTHON

Let's practice!
DataCamp Financial Forecasting in Python

FINANCIAL FORECASTING IN PYTHON

Balance sheet efficiency


ratios - Part 1

Victoria Clark
CGMA Financial Analyst
DataCamp Financial Forecasting in Python
DataCamp Financial Forecasting in Python

Debtors and creditors


Sell now, get paid later
debtors

Buy now, pay later


creditors
DataCamp Financial Forecasting in Python

The debtor days ratio


How many days to receive payment from debtors

Lower ratio is better

Formula:

EndingBalanceDebtors
Debtor Days = Sales x DaysInF inancialY ear

ddays_ratio = (debtors_end/sales_tot) * 365


DataCamp Financial Forecasting in Python

Days payable outstanding (DPO ratio)


How many days to pay our creditors

Higher ratio is better

Formula:

EndingBalanceCreditors
DP O = TotalCostOfGoodsSold x DaysInF inancialY ear

dpo = (creditors_end/cogs_tot)*365
DataCamp Financial Forecasting in Python

FINANCIAL FORECASTING IN PYTHON

Let's practice!
DataCamp Financial Forecasting in Python

FINANCIAL FORECASTING IN PYTHON

Balance sheet efficiency


ratios - Part 2

Victoria Clark
CGMA Financial Analyst
DataCamp Financial Forecasting in Python

Days in inventory

The inventory question:

How much stock is too little, and how much is too much?

How many days to sell our inventory

Days in inventory ratio:

AverageInventory
DII = TotalCostOfGoodsSold
x DaysInF inancialY ear

Desired level depends on the industry


DataCamp Financial Forecasting in Python

Asset turnover ratio


Assets compared to sales generated
Highly dependent on the industry

Formula:

Asset T urnover = Sales


TotalAverageAssets

Production company: high level of assets & low ratio

Tech start up: low level of assets & high ratio


DataCamp Financial Forecasting in Python

FINANCIAL FORECASTING IN PYTHON

Let's practice!

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