What does "financial forecasting" entail?

Financial forecasting involves estimating future financial outcomes based on current and past financial data, market trends, and various economic factors. This process is essential for businesses as it helps in budgeting, planning, and decision-making. By assessing various scenarios, companies can predict revenues, expenses, and overall financial performance, assisting in strategic planning and resource allocation.

It differs significantly from determining historical performance, which focuses on analyzing past financial results, current market trend analysis, which looks at present conditions rather than projections into the future, and managing current assets, which deals with the day-to-day operations and resource management rather than future planning. Financial forecasting is a proactive approach that helps organizations prepare for potential future conditions and make informed financial decisions.