Financial Forecasting

Financial Forecasting

Brenda Ocampo

May 6, 2011

FIN 200

Kizzie Brown

Explain why the following types of companies would need a financial forecast for a Brand new company, Family-owned company, and Long-standing corporation?

A new company needs to have sales projection plan, production plan, to put together a pro forma income statement a new company does not have a prior balance sheet, a income statement, cash balance sheet and other budget plans that can be used to secure operating capital and loans from a bank. As a new company owner we need to see how much product is necessary to start sales, estimate the cost of each item and how much revenue is expected. Being a new company means that there needs to be exploration into the market and, especially seek a way to raise the funds to make a responsible and long standing business.

A family-owned business would need the same things, sales projection, production plan, cash balance, and any other plans to evaluate their situation. The same statements have to be produced to have a financial back up or to get loans from a bank. There also has to be an evaluation of how much revenue is being produced as well as how much of the income will be used to pay bills.

A long standing corporation is no different then the other two. The pro forma income statement, cash budget, and other budgets used together equal to pro forma balance sheets that will be used in the business to obtain loans, set production levels, forecast sales, and forecast profits. These large corporations are also required by SEC to provide much of their information to their shareholders and the public who may want to invest in them. Also they have the advantage at look at past financial statements and produce a forecast based on their business the same time of the previous year, but they also need to make defined financial statements and goals.