Question

8. Identify other techniques for forecasting financial statements discussed in the text and explain when they should be used?

Answer 1

Well,

Financial forecasting:

Helps the business to procure information regarding the future of the business thereby helping in forming strategies.

Most of the it will look into future incomes and expenses.

Divided into two;

1. Qualitative and

2. Quantitative

1. Qualitative:

It is calculated with the help of non measurable factors,Methods include executive opinion , Market research, Delphi method, scenario writing and sales force polling.

2. Quantitative:

It uses past measurable datas for forecast which mainly includes analysis of financial statements.

Financial statements for financial forecasting:

This technique provide every investors about a particular firm in detail, this shows annual business of the firm and other every information. It also helps in comparing the datas of previous years.

a)

Projected funds flow and cash flow statements:

It helps by knowing about the further raising of funds from different sources thereby showing how the company is going to make utilize funds.

Projected cash flows are statements which are considered by mosst of companies financial statements. This include operating, investing and financial activities.b)

b)

Projected income statements and balance sheet

are very important quantitative measures which help an investor to analyse different ratios,percentages, which is very helpful for forecasting.

In income statements: we can get EBITDA, P/E RATIO, NET PROFIT OR LOSS ETC WHICH CAN BE HELPED TO INVEST.

Balance sheet :help us to analyse the total assets and liabilities and liquidity, loans details etc.