Financial Forecasting

Financial forecasting is a very important activity in a company. It can determine the success or failure of the company. In performing the financial forecast, the company must analyze and interpret its market and its projected sales to arrive at a forecast. This can be either a very simple process or a very complex one depending on the company, its market and its level of desired detail (Gallagher and Andrew, 2003).

In deriving a financial forecast, Strident Marks will use its experience in their market. This experience gives the company the insight into market and economic conditions that affect the company’s sales and projections for future sales. This knowledge is very critical in helping shape the forecast going forward for Strident Marks. In understanding the marketplace and future trends, Strident Marks will be more enabled to predict future trends and thus better predict sales. Associating the probability of events occurring and assigning percentages to these events will aid Strident Marks in forecasting future sales. This in coordination with our knowledge of events that correlate to our sales, will allow us to effectively forecast our sales and budget for them. By correlation, I mean other sales or events that occur that relate directly to an increase in demand for our products (Gallagher and Andrew, 2003).

In financial forecasting, Strident Marks will use the knowledge and methods previously discuss to construct pro forma financial statements. Pro forma is a term meaning looking forward in regards to financial statements. It is defined in en.wikipedia.org (2006) as, “The pro forma accounting is a statement of the company's financial activities while excluding "unusual and nonrecurring transactions" (unusual and nonrecurring expenses) when stating how much money the company actually made. Expenses often excluded from pro forma results include company restructuring costs, a decline in the value of the company's investments, or other accounting charges, such as adjusting the current balance sheet to fix faulty accounting practices in previous years.” By excluding non-recurring and unusual charges, the company’s financial results are seen in a more reasonable and realistic viewpoint. In producing the pro forma income statement and balance sheet, Strident Marks will use the financial forecasting information that has been developed to construct the statements (Gallagher and Andrew, 2003).

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