Question

How do you forecast earnings for a company. Example: Revenue for Google was $156,562,000 in year 1, $164,251,000 in year 2, and $166,251,000 in year 3. Forecast years 4, 5, and 6. How would you do that? Also, would it be the same way for all forcasting on Balance sheet and Income Statement items?

Answer 1

Forecasts are done by Company's Accounting department by uniting sum of departments and all assumption both internal and external to company.

Which Means internally company consider for budgetting assumptions made by particular managers regarding output and cost.

External factor are also included in making a forecast such as market condition also adjust for inflation expected to be in the country.

Budgets are prepared on the basis of sum predictions such as incremental or fixed basis based on past results/actuals in the company.

Also in balance sheet and Income statement company will consider for increment or fixed based items separately and multiply with how much times particular account balance is expected to grow from past results.

After all such individual predicts and increments made then consider for total inflation to the forecast to ensure accuracy of balances which consider for change value of money