FINANCIAL FORECASTING CASE STUDY 1

FINANCIAL FORECASTING CASE STUDY

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 FINANCIAL FORECASTING CASE STUDY 2

Financial forecasting is a necessary skill in business management since money is the

lifeline on which business thrives and a lack of which makes up the most common failure for

businesses. It is therefore quite necessary to draw up forecasts that are up-to-date and accurate,

regardless of the company size. Crucially, the process of forecasting requires the business to be

realistic in its expectations of when money will be flowing in and out of business, and the kinds

of sales the business will make to make the profits forecasted (Brooks 2014).

To provide an accurate forecast for Richard and Susana, I would require some

information on their investment which will be helpful for the forecast. First of all, I would

require the restaurant’s expenses for the past year. The expenses of the business make it easier to

predict the future since they are always within the control of the business (Kauko and Palmroos

2014). Some of the expenses I would require from the two would include land rates, book-

keeping records, house rent, bills, and salaries for the workers, insurance and legal costs, and

marketing costs even though in their case these are minimal. Beyond these fixed costs, I would

also require such variable costs as the costs of goods and services they purchase and sell as well

as direct labour costs. Further, I would require their revenues over the same period and then from

there I would start creating the financial forecast.

To start with, I would forecast the investment’s revenues using a combination of

aggressive and aggressive views (Kauko and Palmroos 2014). This combination ensures that the

element of reality is incorporated into the forecast together with the aggressive dreams of the

company. The aggressive dream view is critical in motivating and inspiring both Susana and

Richard, while it also helps inspire those around them and could potentially attract potential

investors (Kauko and Palmroos 2014).

 FINANCIAL FORECASTING CASE STUDY 3

To ensure that the forecast is as accurate as needed, checking the key ratios to make sure

the projections are applicable and sound is necessary. In this essence, I would reconcile the

revenue forecasts and the expense projections by conducting a series of these reality checks, such

as the expected ratio of the restaurant’s expected direct costs to the total revenues for a given

quarter or the entire financial year (Brooks 2014). In addition to these data, making the financial

forecast requires the consultant to include other kinds of information such as a consideration of

the seasonal fluctuations which would be expected during the period of forecasting or projection,

the investors need to be ready for all kinds of market possibilities as they plan for their expenses

and project their revenues. Other information includes demographic projections, seasonality

factors, and technological advancements and their impact on the running of the business during

the period of projection (Brooks 2014).

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Bibliography

Brooks, C., 2014. Introductory econometrics for finance. Cambridge university press.

Kauko, K. and Palmroos, P., 2014. The Delphi method in forecasting financial markets—An

experimental study. International Journal of Forecasting, 30(2), pp.313-327.