Financial Forecasting

Financial forecasting is the process of predicting a company’s future financial performance based on historical data, market analysis, and economic trends. It involves estimating future revenues, expenses, profits, cash flow, and other financial metrics. Companies and investors use these forecasts to plan budgets, make strategic decisions, and manage risks. Financial forecasting is critical for businesses to anticipate potential challenges, set realistic goals, and align resources accordingly.

Example

A manufacturing company uses financial forecasting to project next year’s sales, helping it decide on production levels, workforce requirements, and marketing investments. This proactive planning helps the company allocate resources effectively and prepare for various market conditions.