Coping With Business Risk Through Probabilistic Financial Statements
- 1 April 1982
- journal article
- Published by SAGE Publications in SIMULATION
- Vol. 38 (4), 111-121
- https://doi.org/10.1177/003754978203800402
Abstract
Today's financial environment is a broad arena with many uncertain economic, political, and operational factors. Because of this widespread uncertainty, corporations of all sizes are turning to financial forecasting models. For the most part, however, these models are deterministic and do not consider the riskiness, or likelihood, of the projections fed to them. Our model includes risk explicitly through the introduction of Monte Carlo techniques into a traditional corporate model. The resulting model produces both standard financial reports and the associated probabilities of occurrence, confidence intervals, and standard deviations. The model, which has been validated by historical comparisons, allows the planner to test many scenarios and deter mine the likelihood of satisfactory financial performance.Keywords
This publication has 1 reference indexed in Scilit:
- A SIMULTANEOUS EQUATION APPROACH TO FINANCIAL PLANNINGThe Journal of Finance, 1971