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In your opinion, what profitability models are most accurate for forecasting?

Answer examples and advice for how to answer this interview question for a Financial Analyst interview

How to Answer

As a Financial Analyst, forecasting is a topic you need to feel confident discussing in depth. This question gives you the opportunity to share your experience and your analytical skills. Test your business market knowledge by thinking back on the research you have done for companies in the past.

Use what you have learned to impress the interviewer by showing that you understand the different models and when to use them. Accuracy will be dependent upon if you are using the right model with the right situation. Share the factors that you take into account, such as operations, financial results, the company's position in the marketplace and the different characteristics of the current market.

The most used profitability models are:

- Historical Model
- Trends Based Model
- Analytic Model
- Financial Model

In your opinion, what profitability models are most accurate for forecasting?
Answer example

"I have worked primarily with startups, so I have found using the financial model and looking at trends is most effective. For companies with a more stable financial background, I would use the historical model. It really depends on the company; however, I have found the analytical model to generally be the least accurate. In the end, most models still heavily lean on educated guesswork."

View user-submitted Answers

In your opinion, what profitability models are most accurate for forecasting?
1.
I wish to know many models, learn from them, and modify in a much better way.
2.
Models are based on assumptions. So first set would be revenues these would depend on market economy and competition and management. Second set would be fixed expenses. Then comes variable expenses which would depend on revenue and excel spreadsheet analysis would capture these calculations to give an overall profitability forecast.
3.
I would use profitability models such as graphs and data.
4.
Financial and trend based model to capture the finances in case of changing environment and also for certain areas where it is difficult to forecast trend will provide a better insight.
5.
It depends on your nature of operation and past years results. When we analyze together we gets a reliable result.
6.
It Tottally depends what type of forcast we are doing.... And what is the purpose I.. E if we want accurate forcast with no errors than we need to go with expert panel method and nned to analyse market senarios.. And this method also work in case there is no historical data available w. R. T a new product.. There is a General method used Trend analysis and historical Data sheets to get close to most accurate data forcast.
7.
Case to case basis- Historical A stable market and financial results that are changing slowly and predictably lets me use historical data to forecast profitability. Financials We can calculate interest charges or increasing material costs and add them to expenditures while projecting increasing revenue due to higher sales. Trends and Analytical model.
8.
Healthy working capital.
9.
It depends on your nature of operation and past years results. When we analyze together we gets a reliable result.
10.
Financial and trend model.

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