Huybert,
 
Thanks for your time and for your clarifications!. I think it is also wise to
relate all of them with NPV and IRR! What is your opinion?
 
Second can you elaborate your idea on sheet that i sent as attachmentbut if you
have time :)
 
 
Best regards,
 

 
 
Yasir 

--- On Tue, 11/4/08, Huybert Groenendaal <huybert@...> wrote:

From: Huybert Groenendaal <huybert@...>
Subject: RE: [CBUG] Anlysis on Income Statement!
To: cbug2@yahoogroups.com
Date: Tuesday, November 4, 2008, 5:51 PM






Hi John,

Thanks for the clarifying question!

What I was trying to point out is that you should NOT model the yearly
revenue (and costs) as follows:

. Year 1 - a distribution with for example a min, ML and Max

. Year 2 - a distribution with for example a min, ML and Max

. Year 3 - a distribution with for example a min, ML and Max

. Etc.

The reason that this is not a good way to model sales or revenue (or other
time-series) is that in that case there is not relationship between the
revenues in the different years (which can result in a great underestimation
of your total risk). a better way therefore to model yearly revenue is as
follows (note: there are alternative ways):

. Year 1 - a distribution of revenues with for example a min, ML and
Max

. Year 2 - a distribution to model the growth of the revenue
compared to year 1, with for example a min, ML and Max

. Year 3 - a distribution to model the growth of the revenue
compared to year 2, with for example a min, ML and Max

. Etc.

After modeling the yearly revenues, you can certainly make it a forecast
(and use a trend chart).. Hope this helped and clarified my comment.

Best wishes,

Huybert

From: cbug2@yahoogroups. com [mailto:cbug2@yahoogroups. com] On Behalf Of John
Hicks
Sent: Tuesday, November 04, 2008 10:29 AM
To: cbug2@yahoogroups. com
Subject: RE: [CBUG] Anlysis on Income Statement!

Huybert,

Can you explain a little more the reason for not modeling revenue by year?
Are you suggesting that one should model the revenue or operating profit on
the entire project across years? Or are you saying the revenue or operating
profit from one year should't be the baseline for building the next year's
forecast?

I may be making the error you describe by setting each yearly operating
profit as a forecast. Then I use a trend chart to depict the uncertainty
showing every year.

Thanks for clarifying this.

--- On Wed, 10/29/08, Huybert Groenendaal <huybert@voseconsult ing.com
<mailto:huybert% 40voseconsulting .com> > wrote:

From: Huybert Groenendaal <huybert@voseconsult ing.com
<mailto:huybert% 40voseconsulting .com> >
Subject: RE: [CBUG] Anlysis on Income Statement!
To: cbug2@yahoogroups. com <mailto:cbug2% 40yahoogroups. com>
Date: Wednesday, October 29, 2008, 9:41 PM

Dear Yasir,

Thank you for your email - you have quite a few questions!

There are a number of free resources out that that may help you. For
example, at http://www.crystalb all.com/events/ web_seminars. html, you can
find quite a few seminars that are useful, for example the one on "Risky
Business: Gain a Competitive Advantage by Learning How to Control Risk".

Another nice free resource to help you with putting a good model together is
ModelAssist for Crystal Ball, which is free at
http://www.vosesoft ware.com/ install_modelass ist_cb.htm.

Finally, two quick pieces of advice on your efforts. when projecting revenue
over multiple years, it is important that:

.. You do not simulate a revenue distribution for each future year,
since that would imply that revenues between the different years are
independent, which I'm sure is not the case (this would be one of the most
common mistakes we see in risk models);

.. Second, your expenses are likely also related to your revenues
(certainly the variable costs component), so include variable costs as for
example an 'uncertain' percentage of the uncertain revenue (there are more
methods of doing this, but using a percentage is a fairly straightforward
way).

Hope this helps!

Best wishes,

Huybert

From: cbug2@yahoogroups. com [mailto:cbug2@ yahoogroups. com] On Behalf Of
Engr. Yasir Masood
Sent: Wednesday, October 29, 2008 11:53 AM
To: cbug2@yahoogroups. com
Subject: [CBUG] Anlysis on Income Statement!

Dear All,
I want to conduct risk anaylysis on the income statement ofproject 1 and 2.
Iam usining triangular distribution for assumtion on revenue generated from
project 1&2. any guid line or help how to do that ( my background is
engineering) . File is attached with it. Can put assumption on expenses. How
to get single out put charts

regards

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