Financial forecasting is the process through which a company's future can be estimated. The current revenue of the company can provide a basis for this analysis. The historical data also comes in handy as it can offer comparative values and show how the business has progressed through the years.
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 Pro-forma balance sheet.