The reason type of companies such as brand new companies, family-owned companies, and long-standing companies would need a financial forecast is to develop projected financial statements; a series of pro forma. The information developed by a series of pro forma provide a sort of estimate on inventory, payables, receivables as well as what would be required for profit and borrowing. A projected financial statement provides a kind of advantage in any of the companies listed above as it gives the firm an insight on operations. A pro forma would help guide companies in deciding how to best operate and succeed. When starting a brand new company a financial forecast is essential.
A financial forecast would help a brand new company decide on how much inventory would be needed, cost of start up and production, and how much capital is needed. Obtaining a financial forecast would also help guide a brand new company on how much profit the company can make, whether a bank loan would be needed to start up and how many individuals can be hired. Family-owned companies need financial forecast just as much as a brand new company.
A family-owned company would need a financial forecast for obtaining information from the simplest of things like how much inventory is in stock, profit sharing, expected expenses and profit for the future. A family-owned company would need a financial forecast to also make good decisions on continuing a successful business, which department needs revamped or tweaked. It is essential for a family-owned company to obtain a financial forecast to also estimate whether sales income would be enough to cover expenses and whether cutbacks need to be made.
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