Question

Discuss the importance and process of financial forecasting. Provide examples of both revenue and expense forecasting methods. please include mathematical equations for clarification when appropriate.

Answer 1

FINANCIAL FORECASTING :-

Financial forecast is a fiscal management tool that presesnts estimated information based on past current and projected financial conditions.

The main purpose of the financial forecast is to evaluate current and future fiscal conditions to guid policy and programatic decisions.

IMPORTANT STEPS FOR SUCCESSFUL FINANCIAL FORECASTING:-

The business planning process can help the entrpreneur think strategically about their business &

Prepare them to explain the business model to potential leaders &investers.

1-Define Revenue forecast Type :-

It is the foundation itcp decide what you want to use for you revenue forcast prolen. Include producer and supplyers.

2)-create a '12 'month Revenue :-

In this step we think about specific customers you might sell to each month .

3-Add Direct costs :-

The amount to direct costs should be correlated with revenue. It the expense occurs. Wher you sell something or not.

4-Add fixed expenses:-

It includes rent, telephone insurance & internet expen

5-Add some veriable Expern:-

Keep in mind the time lay beturn when the expense occurs&the result impact on sales.

6-Add Item impact on cash flow :-

This includes such things as assets & terms. and should custerms credit terms you would give to your custemers &your credit proveded by cr suppliers.

Importance of financial

forcurtiry

a- Ecnomic development :-

The forecast should be related to GNP. GDP of the companies nation.

b - Tecnological forcasts.

c - competition forcasts.

d- social fircast.