A financial forecast is an estimate of future financial outcomes for a

company A company, abbreviated as co., is a Legal personality, legal entity representing an association of legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...

project A project is a type of assignment, typically involving research or design, that is carefully planned to achieve a specific objective. An alternative view sees a project managerially as a sequence of events: a "set of interrelated tasks to be ...

, usually applied in

budgeting A budget is a calculation plan, usually but not always financial plan, financial, for a defined accounting period, period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including tim ...

capital budgeting Capital budgeting in corporate finance, corporate planning and accounting is an area of capital management that concerns the planning process used to determine whether an organization's long term capital investments such as new machinery, repla ...

and/or valuation. Depending on context, the term may also refer to listed company (quarterly) earnings guidance. For a

country A country is a distinct part of the world, such as a state, nation, or other political entity. When referring to a specific polity, the term "country" may refer to a sovereign state, state with limited recognition, constituent country, ...

economy An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...

, see

Economic forecast Economic forecasting is the process of making predictions about the economy. Forecasts can be carried out at a high level of aggregation—for example for GDP, inflation, unemployment or the fiscal deficit—or at a more disaggregated level, fo ...

. 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 . 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 asset Fixed assets (also known as long-lived assets or property, plant and equipment; PP&E) is a term used in accounting for assets and property that may not easily be converted into cash. They are contrasted with current assets, such as cash, bank ac ...

s (see, here, owner earnings) and associated financing; and in the long term, profitability (and other financial ratios) should tend to the industry average; see for more detailed discussion, and other considerations; also

Cash flow forecasting Cash flow forecasting is the process of obtaining an estimate of a company's future cash levels, and its financial position more generally. A cash flow forecast is a key financial management tool, both for large corporates, and for smaller entr ...

. There is an extensive literature on the accuracy of analyst forecasts of revenue, profit and share price developments of companies. In general, this literature shows that analysts do not produce better forecasts than simple forecasting models. (Additional to the above outline, for financial forecasts, analysts often also use specific financial historical information, such as the 52-week high of stock prices, to augment their analysis of stock prices.)

References

Budgets Forecasting Corporate finance Management accounting {{finance-stub