Financial Forecast

Financial forecasting is predicting a company’s financial future by examining historical performance data, such as revenue, cash flow, expenses, or sales. This involves assumptions as many unforeseen factors can influence business performance.

Financial forecasting is important because it informs business decision-making regarding hiring, budgeting, predicting revenue, and strategic planning.

Financial forecasting is essential in attracting investors to contribute to the company; it also helps the company predict budgets and spending costs. There are two ways of producing a financial forecast: quantitative analysis relies on the company's historical data while qualitative analysis is based on intuition and experience.

There are three essential components of a financial forecast: income statement, cash flow statement, and balance sheet.