What is a financial forecast?

A financial forecast is an estimate of future financial outcomes for a company. It is used to project anticipated revenues, expenses, and other financial metrics based on historical data, market trends, and strategic plans. By assessing variables that influence future performance, businesses can prepare for future opportunities and challenges, setting realistic budgets and financial goals.

In contrast to a historical analysis, which focuses on what has already happened, financial forecasts are predictive and forward-looking, vital for strategic planning and decision-making. This prospective nature differentiates forecasts from comprehensive reports or cash balance statements, which describe or analyze past or current financial states.