A financial forecast is an estimate of future financial outcomes for a company or project, usually applied in budgeting, capital budgeting and / or valuation. Depending on context, the term may also refer to listed company (quarterly) earnings guidance. For a country or economy, see Economic forecast. Typically, using historical internal accounting and sales data, in addition to external industry data and economic indicators, a financial forecast will be the analyst's modeled prediction of company outcomes in financial terms over a given time period. For the components / steps of business modeling here, see Outline of finance § Financial modeling. Arguably, the key aspect of preparing a financial forecast is predicting revenue; future costs, fixed and variable, as well as capital, can then be estimated as a function of sales via "common-sized analysis" - where relationships are derived from historical financial ratios and other accounting relationships. At the same time, the resultant line items must talk to the business' operations:- in general, growth in revenue will require corresponding increases in working capital, fixed assets (see, here, owner earnings...

Here's why and how your small business should engage in financial forecasting.

...

Accurately gauging your business's value isn't an exact science. Learn valuation methods, how to calculate your business's value and why it's important.

In economics, profit is the difference between revenue that an economic entity has received from its outputs and total costs of its inputs, also known as surplus value. It is equal to total revenue minus total cost, including both explicit and implicit costs.It is different from accounting profit, which only relates to the explicit costs that appear on a firm's financial statements. An accountant measures the firm's accounting profit as the firm's total revenue minus only the firm's explicit costs. An economist includes all costs, both explicit and implicit costs, when analyzing a firm. Therefore, economic profit is smaller than accounting profit.Normal profit is often viewed in conjunction with economic profit. Normal profits in business refer to a situation where a company generates revenue that is equal to the total costs incurred in its operation, thus allowing it to remain operational in a competitive industry. It is the minimum profit level that a company can achieve to justify its continued operation in the market where there is competition. In order to determine if a company has achieved normal profit, they first have...

Learn why profit margins are important to your business and how to maximize them.

Business failure refers to a company ceasing operations following its inability to make a profit or to bring in enough revenue to cover its expenses. A profitable business can fail if it does not generate adequate cash flow to meet expenses. Reasons Businesses can fail as a result of wars, recessions, high taxation, high interest rates, excessive regulations, poor management decisions, insufficient marketing, inability to compete with other similar businesses, or a lack of interest from the public in the business's offerings. Some businesses may choose to shut down prior to an expected failure. Others may continue to operate until they are forced out by a court order. The Small Business Administration, in an article on small business failure, lists additional reasons for failure from Michael Ames' book on "Small Business Management": lack of experience Un-trusted sales representative insufficient capital poor inventory management over-investment in fixed assets business's finance mismanagement poor business location poor credit arrangement management...