Simultaneous Equation Models for Financial Planning and Forecasting

Cheng-Few Lee (), Alice C. Lee and Wen-chi Yeh ()
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Cheng-Few Lee: Rutgers University
Alice C. Lee: Center for PBBEF Research
Wen-chi Yeh: Rutgers University

Chapter 99 in Encyclopedia of Finance, 2022, pp 2341-2367 from Springer

Abstract: Abstract This chapter first discusses Warren and Shelton (J Finance, 26:1123–1142, 2007) and Francis and Rowell’s (Financ Manag 7:29–44, 1978) simultaneous equation models for financial planning and forecasting in detail. Then we use Johnson & Johnson’s 2018 financial data in terms of Excel programming to demonstrate how Warren and Shelton’s model can be used for financial analysis, planning, and forecasting. Data from 2019 and 2020 is used to evaluate the performance of Warren and Shelton’s model. In addition, sensitivity analysis is used to demonstrate how the change of growth rate, debt equity ratio, and P/E ratio can affect the price per share for Johnson & Johnson.

Keywords: Simultaneous equation; Financial planning and forecasting; Sustainable growth rate; Debt equity ratio; Payout ratio; P/E ratio; Sensitivity analysis (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-91231-4_102

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DOI: 10.1007/978-3-030-91231-4_102

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