Why construct financial forecasts?

Question:

Why construct financial forecasts?

Finance

In simple words, finance can be regarded as a process of managing capital or money. This can include a sequence of activities where the capital is either invested, budgeted, or borrowed.

Answer and Explanation:

The construction of financial forecasts is vital due to the following reasons:

  • To provide a perspective regarding the growth of a company.
  • They can be considered as a point of reference for analyzing the performance of the company with respect to itself and in comparison to its competitors.
  • Are useful in determining future investment amounts required for business endeavors as well as about the viability of those endeavors.
  • For a company to recognize deficits in manufacturing and accordingly take the appropriate corrective measures.
  • These predictions help organizations set targets of manufacturing for potential consumers so that there are minimal losses.

Learn more about this topic:

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What Is Financing? - Definition & Types

from Corporate Finance: Help & Review

Chapter 8 / Lesson 7
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