Track D: Chapter 20 — Integrated forecasting (P&L + BS + cash tie-out)

Makefile

@@ -408,6 +408,10 @@ business-ch18:
 business-ch19:
 	$(PYTHON) -m scripts.business_ch19_cash_flow_forecasting_direct_method_13_week --datadir $(OUT_NSO_V1) --outdir $(OUT_TRACK_D) --seed $(SEED)
 
+.PHONY: business-ch20
+business-ch20:
+	$(PYTHON) -m scripts.business_ch20_integrated_forecasting_three_statements --datadir $(OUT_NSO_V1) --outdir $(OUT_TRACK_D) --seed $(SEED)
+
 
 # --- Quality gates ---
 .PHONY: lint

docs/source/business_ch20_integrated_forecasting_three_statements.rst

@@ -0,0 +1,151 @@
+Track D — Chapter 20
+====================
+
+Integrated forecasting (P&L + balance sheet + cash tie-out)
+-----------------------------------------------------------
+
+In Chapter 19 you learned how to build a short-term cash forecast.
+In practice, most organizations also maintain a **medium-term** plan (often 12 months)
+that ties together:
+
+- **Profit & loss** (accrual): what the business earns and spends.
+- **Balance sheet** (stocks): what the business owns/owes at month-end.
+- **Cash flow** (flows): how we get from beginning cash to ending cash.
+
+The key idea is simple:
+
+**A forecast is not finished until the three statements reconcile.**
+
+If profit goes up but cash goes down, the model should explain it through
+working capital (AR/inventory/AP), capex, or financing.
+
+Learning objectives
+-------------------
+
+By the end of this chapter you will be able to:
+
+- Build a 12‑month integrated forecast that ties P&L, balance sheet, and cash.
+- Forecast key balance sheet drivers (AR, inventory, AP, debt, fixed assets).
+- Reconcile cash using a bridge and surface any **residual** explicitly.
+- Explain “profit up, cash down” using working-capital logic.
+
+Data source (NSO v1)
+--------------------
+
+This chapter uses the simulator’s statement tables:
+
+- ``statements_is_monthly.csv`` (income statement)
+- ``statements_bs_monthly.csv`` (balance sheet)
+- ``statements_cf_monthly.csv`` (cash flow bridge lines)
+
+We treat these as the **canonical truth** for the historical period, and then
+use simple, accountant-friendly rules to extend the model forward.
+
+Walkthrough: how the tie-out works
+----------------------------------
+
+1) Forecast the P&L
+^^^^^^^^^^^^^^^^^^^
+
+We build a baseline revenue forecast using a **seasonal naive** approach
+(each future month starts from the average of that calendar month in history).
+
+Then we forecast costs using simple **rates**:
+
+- COGS is forecast as a recent median COGS-to-revenue ratio.
+- Operating expenses are forecast as a recent median opex-to-revenue ratio.
+
+This keeps the focus on the integration logic (not fancy forecasting methods).
+
+2) Forecast key balance sheet items
+^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
+
+We forecast working capital using “days” heuristics:
+
+- **DSO** (days sales outstanding) → AR ≈ revenue × DSO / 30
+- **DIO** (days inventory outstanding) → inventory ≈ COGS × DIO / 30
+- **DPO** (days payable outstanding) → AP ≈ COGS × DPO / 30
+
+We also carry forward debt and fixed assets using simple rules:
+
+- Capex is estimated from recent cash capex and increases PP&E cost.
+- Depreciation increases accumulated depreciation (a contra asset).
+- Notes payable decreases by a typical principal payment (if present).
+
+3) Reconcile cash
+^^^^^^^^^^^^^^^^^
+
+Cash is reconciled using a bridge:
+
+.. math::
+
+   \Delta Cash \approx Net\ Income + Depreciation - \Delta AR - \Delta Inventory + \Delta AP
+   \; + \; Investing \; + \; Financing
+
+We write the bridge explicitly and compute a **residual** (difference between
+the bridge and the balance sheet cash). Ideally it is near zero; if not, it is
+a signal the assumptions need review.
+
+How to run Chapter 20
+---------------------
+
+Prerequisite: generate the NSO dataset (once)
+^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
+
+If you already ran Chapters 14–19, you already have NSO v1 in:
+
+``data/synthetic/nso_v1``
+
+If not:
+
+.. code-block:: bash
+
+   make business-nso-sim
+   make business-validate
+
+Run the Chapter 20 analysis
+^^^^^^^^^^^^^^^^^^^^^^^^^^^
+
+.. code-block:: bash
+
+   make business-ch20
+
+By default this runs:
+
+.. code-block:: bash
+
+   python -m scripts.business_ch20_integrated_forecasting_three_statements \
+     --datadir data/synthetic/nso_v1 \
+     --outdir outputs/track_d \
+     --seed 123
+
+Outputs
+-------
+
+All artifacts are written under:
+
+``outputs/track_d``
+
+Core tables (CSV)
+^^^^^^^^^^^^^^^^^
+
+- ``ch20_pnl_forecast_monthly.csv``
+- ``ch20_balance_sheet_forecast_monthly.csv``
+- ``ch20_cash_flow_forecast_monthly.csv``
+- ``ch20_assumptions.csv``
+
+Meta artifacts
+^^^^^^^^^^^^^^
+
+- ``ch20_design.json``
+- ``ch20_memo.md``
+- ``ch20_figures_manifest.csv`` + figures in ``outputs/track_d/figures/``
+
+End-of-chapter problems
+-----------------------
+
+1) Build an integrated skeleton and reconcile the three statements.
+
+2) Working capital scenario: show profit up but cash down and explain.
+
+3) Identify three common integration errors and how to catch them.

docs/source/index.rst

@@ -169,5 +169,6 @@ See :doc:`getting_started` and :doc:`contributing` for the contributor workflow.
    business_ch17_revenue_forecasting_segmentation_drivers
    business_ch18_expense_forecasting_fixed_variable_step_payroll
    business_ch19_cash_flow_forecasting_direct_method_13_week
+   business_ch20_integrated_forecasting_three_statements
    business_appendix_pdf_refresher
    business_appendix_authoring_rules