SME short notes on Financial Projection
Posted by Ripon Abu Hasnat on Thursday, November 19, 2015 | 0 comments
Financial Projection is the predictions for future profit and expense for an organization or country. History, internal information, cost data, and other things are considered to get this figure. It generates a picture of where the company will be in the future as well.
In other word, A forecast of future revenues and expenses for a business, organization, or country. A financial projection will typically take into account both internal information such as historical income and cost data, and estimates of the development of external market factors, providing estimated figures in addition to projections of the general financial condition of the company in the future.
Essential element of planning that is the basis for budgeting activities and estimating future financing needs of a firm. Financial projections (forecasts) begin with forecasting sales and their related expenses.
The basic steps in financial Projection are:
(1) Project the firm's sales;
(2) Project variables such as expenses and assets;
(3) Estimate the level of investment in current and fixed assets that is required to support the projected sales; and
(4) Calculate the firm's financing needs.
(1) Project the firm's sales;
(2) Project variables such as expenses and assets;
(3) Estimate the level of investment in current and fixed assets that is required to support the projected sales; and
(4) Calculate the firm's financing needs.
The basic tools for financial forecasting include the percent-of-sales-method, regression analysis, and financial modeling.
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