Financial forecast
A financial forecast is an estimate of future financial outcomes for a company or project, usually applied in budgeting, capital budgeting and / or valuation; see Financial modeling #Accounting.
Depending on context the term may also refer to listed company earnings guidance.
For a :Category:Economics lists by country|country or economy, see Economic forecast.
Typically, using historical internal accounting and sales data, in addition to external industry data and economic indicators, a financial forecast will be the analyst's modeled prediction of company outcomes in financial terms over a given time period.
For the components / steps of business modeling here, see the list for "Equity valuation" under Outline of finance #Discounted cash flow valuation.
Arguably, the key aspect of preparing a financial forecast is predicting revenue; future costs, fixed and variable, as well as capital, can then be estimated as a function of sales via "common-sized analysis" - where relationships are derived from historical financial ratios and other accounting relationships.
At the same time, the resultant line items must talk to the business' operations:- in general, growth in revenue will require corresponding increases in working capital, fixed assets and associated financing; and in the long term, profitability should tend to the industry average;
see Valuation using discounted cash flows #Determine cash flow for each forecast period for more detailed discussion, and other considerations.
