quarterly modeling mechanics because companies provide results on a quarterly or half yearly basis analysts will usually build their forecast for at least the next year on the same basis. So for a US company reporting on a quarterly basis, the analysts will typically forecast the next four quarters in their model allowing them to track the company's performance in their quarterly forecasts against their expectations the quarterly forecast then underpin the annual forecasts. Forecasting numbers on a quarterly basis will create lots of extra columns in your model and can make it difficult to monitor the trend in annual numbers to make this easier analysts typically group The quarterly forecasts so that these columns can be hidden or revealed as necessary. The Microsoft Excel keyboard shortcut for grouping columns is shown on the screen.

In terms of how the quarterly forecasts are used to build annual forecasts. We'll look at each part of the model in turn. For the income statement annual forecasts are calculated by some in quarter revenues and profit forecasts. This can be done for each line in the income statement. Although some analysts prefer to only forecast Key line items such as revenues gross profit and operating profit for each quarter with the remaining line items such as interest and tax forecast only on an annual basis. For the balance sheet analysts typically forecast the key line items on a quarterly basis and then annual forecasts are taken from the Q4 end balances. This is because balance sheets represent values at a point in time rather than over a period of time. For the cash flow statement some analysts will choose to forecast this on a quarterly basis using the quarterly income statement and balance sheet information. When this is done, the annual cash flows are then calculated by summing the quarterly cash flows. However, some analysts will forecast only annual cash flows using the annual income statement and balance sheet information. So these are the Mechanics for how quarterly forecast information is used to underpin annual forecasts.