Running Head: FINANCIAL STATEMENT FORECAST

Financial Statement Forecast

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Student

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Financial Statement Forecast

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The managers and accountant fail to focus on the future activities. For instance, the

manager of a plant fails to tell how much a new plant will cost and how it will be financed.

They fail avoid costly forecast errors and rarely touch on reliability. As a result, they end

providing predictions that are not objective and that are biased in terms of the business

financing, investing, and operating activities. The problem with accountants is that they tend

to be conservative while the managers tend to be optimistic (Wahlen, 2014). However, the

forecast need not to be conservative nor optimistic, they should be based on reality and

accurate results.

Another element that should be removed from forecasting is the wishful thinking

(Wahlen, 2014). This is to say that managers and accountants ought not make forecast on

strategies that highly hope that the business will take. In that regard, you need to capture the

strategies that you have firm belief that propel you to achieve and execute in the future.

The financial statement forecasts ought to include any expected future expected

activity. For example, some managers and accountants will take a dirty and quick approach of

using the most recent sales reports to make a prediction on how much the company will make

in the next financial period (Wahlen, 2014). This analyst will have failed to factor in all the

factors that determines the future profitability which sometimes can make the revenue

forecasts be misleading, incomplete and erroneous. By taking this road, you will have failed

to include some key considerations like whether the expenses and the cost of goods will go

up or down in comparison to the sales. Thus, the financial statement forecast must be

consistent internally and the assumptions that are being made must have external validity.

References
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Wahlen, J. M., Baginski, S. P., & Bradshaw, M. (2014). Financial reporting, financial

statement analysis and valuation. Nelson Education.