Qquestion 1: What Is Financial Forecasting? Explain

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The lack of planning and control of cash resources is the reason often given for the failure of many small businesses in all over the world and to reduce the risks of failure of these small businesses and to a large big companies and firms. In a lay man’s terms financial forecasting is much like a map; just the way a map helps you plan a long road trip, so also does financial forecasting helps managers on their way to successful business year

A financial forecast is a tool that allows a manager to use available resources where they're most needed, so he can control the cash flow of the company’s business, instead of it controlling him. It allows him to control the company’s money so he is more likely to achieve desired goals, in other words a financial forecast is simply a financial plan or budget for usually a business year. It is an estimate of two essential future financial outcomes for a business – the projected income and expenses. When a manager creates a cash flow forecast by adding income and expenses as they are due, then he can find out exactly how much the company’s fortune will look like.

A financial forecast is the best guess that a manager can use to foresee what will happen to the company financially over a period of time. Usually, financial forecasts are an estimate of future income and expenses for a business over the next year and are used to develop the projections of profit and loss statements, balance sheets and, most critically, the cash flow forecast. Usually it is quite difficult for a manager to predict the financial future of the company especially when it is the first forecasting of the company, this is because more accurate prediction can be done more easily by trading history

Some importance of Financial Forecasting

1. It helps the manager to know the validity of the business, since it clearly forecast when and how the desired profits would be made

2. Since a business requires regular review and amendment to be effective,...