Financial Forecast

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A financial forecast is normally an estimate of future financial outcomes for a company or country (for futures and currency markets). Using historical internal accounting and sales data, in addition to external market and economic indicators, a financial forecast is an economist's best guess of what will happen to a company in financial terms over a given time period which is usually one year. See financial modeling.

Arguably, the most difficult aspect of preparing a financial forecast is predicting revenue. Future costs can be estimated by using historical accounting data; variable costs are also a function of sales.

Unlike a financial plan or a budget a financial forecast doesn't have to be used as a planning document. Outside analysts can use a financial forecast to estimate a company's success in the coming year.

Reference class forecasting was developed to reduce error and increase accuracy in financial forecasts

 

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