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Simultaneous Equation Models for Financial Planning and Forecasting

In: Encyclopedia of Finance

Author

Listed:
  • Cheng-Few Lee

    (Rutgers University)

  • Alice C. Lee

    (Center for PBBEF Research)

  • Wen-chi Yeh

    (Rutgers University)

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.

Suggested Citation

  • Cheng-Few Lee & Alice C. Lee & Wen-chi Yeh, 2022. "Simultaneous Equation Models for Financial Planning and Forecasting," Springer Books, in: Cheng-Few Lee & Alice C. Lee (ed.), Encyclopedia of Finance, edition 0, chapter 99, pages 2341-2367, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-91231-4_102
    DOI: 10.1007/978-3-030-91231-4_102
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