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Techniques of Financial Statement Forecasting Major techniques that are employed in financial statement forecasting are discussed below: Percentage of Sales Method: It is another commonly used method for estimating financial requirements of the firm based on a forecast of sales. Any change in sales is likely to have an impact on various individual items of assets and liabilities of the balance sheet of a firm. Days Sales Method: It is a traditional technique used to forecast the sales by calculating the number of days and establishing its relationship with the balance sheet items to arrive at the forecasted balance sheet. For forecasting funds requirement of a firm, it is the most useful technique. Simple Linear Regression Method: It is concerned with the distribution of two variables. Simple regression analysis provides estimates of values of the dependent variable from values of the independent variable. The device used...

Financial Statement Forecasting Financial Statement Forecasting The financial statement forecasting begins with  the forecasting of the future estimates that are made through preparation of statement like projected income statement, projected balance sheet, projected cash flow and fund flow statements, cash budget, preparation of projected financial statements with the help of ratios etc. Financial statement forecasting is useful in making various financial decisions like capital investment, annual production level, operational efficiency required, requirement of working capital, assessment of cash flow, raising of long term funds, estimation of funds requirement of business, estimated growth in sales etc. When we forecast the financial statement we forecast the Profit and Loss and Cash Flows. From these financial statements, we get the forecasted Balance Sheet. When we prepare the Profit and Loss, we start from the sales figures. For forecasting the sales figure...