Financial Forecasting

Financial Forecasting

Name

Course name

Course number

Instructor’s name

Date

Financial forecasting.

Assumptions underlying estimates in budgets and pro forma financial statements.

Salaries- the managers the costs that may be incurred in salaries and when preparing budgets. The assumed salaries will be based on the duration the project is going to last. For example, I this case, the salary assumptions will be made based on the two years that the budget is expected to last. Indirect costs. These re the costs that can’t be directly related to the project being taken. For example, office supplies and furniture which do not have direct connection to the execution of the project but are assumed to be there (Quinn, 2014).

Equipment – in the course of execution of the project, some equipment’s may be required for example during the process of advertising. On top of the actual established mechanisms, the advertising team will also need some equipment’s such as loud speakers for trade shows and events. Material costs. These are created and determined by the managers based on the previous experience or from other methods of estimation. For example, the cost of sale is determined from the cost of sales from the previous financial period (Gitman, et al, 2015).

Components of sale forecast

The forecast should be adaptable to the business needs and the growth of the business.it should aim at reducing costs thereby enhancing good business practices and instilling consistency in the various divisions of the business. It should also incorporate the industrial trends in which the business is operating in (Moynihan& Wang, 2015). For starters if the trend is showing a decline in sales, the forecast should be designed so as not to expect a lot of sales. One thing that must be learnt is that the forecasts usually project the most optimal outcome and mostly does not pay attention to minor details such as failure to sell all the sales projected. Lately, it should be realistic such that I do not entirely base all the projections to success but also expect some mishaps that may occur along the way (Hartzel & Wood (2017).

References

Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.

Hartzel, K. S., & Wood, C. A. (2017). Factors that affect the improvement of demand forecast accuracy through point-of-sale reporting. European Journal of Operational Research, 260(1), 171-182.

Moynihan, G. P., & Wang, S. (2015). Web-based decision support system for integrated supply chain management. International Journal of Logistics Systems and Management, 21(3), 269-283.

Quinn, M. (2014). Stability and change in management accounting over time—A century or so of evidence from Guinness. Management Accounting Research, 25(1), 76-92.