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Differentiate between forecasting and budgeting

You are a participant in the biweekly meeting with the finance department. You have been asked to lead the discussion on the role that forecasting should play at Strident Marks. Discuss the financial statement forecasting process and compare it to, and differentiate it from, the budgeting process. Why is forecasting important to an organization?

Solution Preview

Forecasting is a process of analyzing historical data and relating it to current data in an effort to predict future trends. It is a macroeconomic concept as opposed to budgeting which is micro activity.

Regardless of the type of business, there are decisions to be made that involve judging the future course of the business and the economy. They may include whether or whether not to:

1. expand internationally
2. expand regionally or ...

Solution Summary

The solution explains the importance of forecasting and gives examples of the difference between forecasting and budgeting. There are 11 specific situations listed in the solution of types of actions in which forecasting plays a role. Further included is the integration of budgeting with forecasting.

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