Build a sensitivity analysis for the net profit

Txs Tools has provided the following forecast admin cost in USD based on full-time employees:

Jul = 1500 Aug = 1500 Sep = 1500

Build the forecast net profit forecast_net_profit when emp_leave = [6, 6, 0] and the cost per temp employee is 80 USD.

In addition to emp_leave and admin_usd, forecast gross profit has already been provided for you as forecast_gross_profit.

This exercise is part of the course

Financial Forecasting in Python

Exercise instructions

Create an index variable and initialize this index to 0.
Create the dependency by looping through the admin_usd list, using your index to access the correct month in your lists.
- Set the number of temporary employees (temp) by referencing your emp_leave list at the current index
- If there are temporary employees, your admin dependencies (admin_dep) should reflect the additional cost of the temporary employees (plus the standard admin costs)
- Else, admin_dep should reflect the standard admin costs.
Calculate forecast_net_profit as forecast_gross_profit (at the index) minus the calculated admin_dep.
Print the forecast_net_profit.

Hands-on interactive exercise

Have a go at this exercise by completing this sample code.

admin_usd = [1500, 1500, 1500]
emp_leave = [6, 6, 0]
forecast_gross_profit = [4850, 2800, 4600]
index = ____

for admin in admin_usd:
    temp = ____[index]
    if temp > 0:
        admin_dep = ____ * 80 + admin
    else: 
         admin_dep = ____ 
    forecast_net_profit = forecast_gross_profit[____] - ____
    print(forecast_net_profit)
    index += 1
print("The forecast net profit is:")

Edit and Run Code

This exercise is part of the course

Financial Forecasting in Python

IntermediateSkill Level

4.8+

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In this chapter, we will learn the basics of financial statements, with a specific focus on the income statement, which provides details on our sales, costs, and profits. We will learn how to calculate profitability metrics and finish off what we have learned by building our profit forecast for Tesla!

Exercise 1: Introduction to financial statements Exercise 2: Calculating gross profit Exercise 3: Calculating net profit Exercise 4: Elements within net profit & gross profit Exercise 5: Calculating sales & Cost of Goods Sold (COGS)Exercise 6: Calculating sales Exercise 7: Forecasting sales with a discount Exercise 8: Calculating COGS Exercise 9: Calculating the break-even point Exercise 10: Working with raw forecast datasets Exercise 11: Tesla income statement Exercise 12: Forecasting profit for Tesla

In this chapter, we will learn a bit more about the balance sheet, covering assets and liabilities and specific ratios to help evaluate the financial health and efficiency of a company, as well as how these ratios can assist us in building a great forecast.

Exercise 1: Introduction to the balance sheet Exercise 2: Calculating accounts receivable (debtors)Exercise 3: Bad debts Exercise 4: Calculating accounts payable (creditors)Exercise 5: Understanding accounts payable and receivable Exercise 6: Balance sheet efficiency ratios - Part 1 Exercise 7: Debtor days ratio Exercise 8: Days payable outstanding Exercise 9: Balance sheet efficiency ratios - Part 2 Exercise 10: Days in inventory and asset turnover ratio Exercise 11: Understanding ratios Exercise 12: Calculating balance sheet ratios for Ford Exercise 13: Forecasting the balance sheet for Ford

We have gotten a basic understanding of income statements and balance sheets. However, consolidating data for forecasting is complex, so in this chapter, we will look at some basic tools to help solve some of the complexities specifically relating to finance - working with dates and different financial periods, and formatting our raw data into the correct format for financial forecasting.

Exercise 1: Financial periods and how to work with them Exercise 2: Converting quarters into months Exercise 3: Merging months into quarters Exercise 4: The datetime library Exercise 5: Working with the datetime library Exercise 6: Converting date formats - simple Exercise 7: Converting date formats - explicit Exercise 8: Tips and tricks when working with datasets Exercise 9: Working with datasets - month totals Exercise 10: Working with datasets - combining datasets Exercise 11: Working with datasets - exporting data

In this chapter, we will be exploring two more aspects to creating a good forecast. First, we will look at assumptions, what drives them and what happens when an assumption changes? Next, we will look at variances, as a forecast is built at one point in time, but what happens when the actual results do not correspond to our forecast? We need to build a sensitive forecast that can be sensitive to changes in both assumptions and take into account variances, and this is what we will explore in this chapter.

Exercise 1: Building sensitive forecast models Exercise 2: Weighted probability Exercise 3: Market sentiment Exercise 4: Dependencies and sensitivity Exercise 5: Assigning dependencies for sales and COGS Exercise 6: Building a sensitivity analysis for gross profit Exercise 7: Assigning dependencies for expenses Exercise 8: Build a sensitivity analysis for the net profit

Current Exercise

Exercise 9: Working with variances in the forecast Exercise 10: Building an alternate forecast Exercise 11: Building a gap analysis between forecasts Exercise 12: Setting dependencies for Netflix Exercise 13: Calculating an alternative forecast for Netflix