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Why is Forecasting important and what is the process

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Why is forecasting is important in an organization and how the process of forecasting works?

How does forecasting compare to the budgeting process and can you explain how it contrasts with it.

What is the role of projected financial statements in the budgeting process?

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Solution Summary

The solution examines forecasting importance and that process. The role of projected financial statements in the budgeting process is determined.

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Forecasting is one of the most important, forward-thinking tasks that business leaders perform because it sets the stage for everything to follow including budgeting and other resource allocation including human resources (whether to hire, maintain, or layoff). The process of forecasting works by having business leaders look across a set of performance measures and, based upon sound scientific theory combined with intuition about ones industry, set realistic levels of expectations about earnings and performance for a set time period in the near future. For example, a firm may begin looking in October of 2009 forward to forecasting sales revenues, costs, and opportunities for the year 2010. The firm's leaders may look at growth potential of the ...

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