Tax Planning Assignment >> Personal & Family Financial Planning
TOTAL POINTS 4
Financial projections are based on compiling the Internal and external accounting data you already use in the day-to-day management of your business. By projecting your revenue and expenses. you can get a more accurate view of how successful your business can be. Creating financial projections Is not an easy task but Is a very important part of developing a sound strategy. The financials tell you what goals to keep and what to cut.
Projections can also be a guide to help your business grow without running out of cash. To generate and support
additional revenues, additional cash is always required. Financial projections help you assess what additional
assets are needed to support increased revenue and the potential impact on your balance sheet. The projected financial plan indicates how much additional debt or equity you need to remain solvent and healthy.
If your business has been in operation for more than a year, creditors will not only request data on your past
performances, referred to as historical data, they will also ask for financial projections. creditors typically want
these types of information for the past and future three to five years. Depending on how long you”ve been in business, it could be more or less.
Financial projections should include a forecasting of the income statement the balance sheet. and the cash flow statement. Projections are made by the month for the first year and then by the year for the next two years.