Guide to Financial Projections
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What Are Financial Projections?
How Do Financial Projections Work?
Income statement projection Cash flow projection Balance sheet projection
What Are Financial Projections Used For?
7 Steps To Make Financial Projections
1. Collect Your Financial Records
2. Create a Sales Projection
3. Create an Expense Projection
4. Create an Income Statement Projection
5. Create a Cash Flow Projection
6. Create a Balance Sheet Projection
7. Create a Report
Limitations of Financial Projections
3 Things To Include in a Financial Projection
1. Income Statement
Revenue This is the money you will earn from whatever goods or services you provide. Expenses This includes direct costs of producing your goods or services (like materials, equipment rentals, employee wages) and general and administrative costs (such as accounting fees, advertising, insurance, office rent). Total income This is your revenue minus your expenses, before income taxes. Income taxes This is the money your business pays to the government. Net income This is your total income after income taxes.
2. Balance Sheet
Assets These are the tangible objects of financial value owned by your company, including cash, supplies, equipment, and real estate. Liabilities This include any debts your business owes, such as loans, payroll, upcoming payments for materials. Equity This is what you get when you subtract your business’s total assets from its total liabilities.
3. Cash Flow Statement
Cash revenues This is an overview of your estimated sales for a given time period. Cash disbursements This lists all of the cash expenditures that you expect to pay during that time period. Reconciliation of cash revenues to cash disbursements This involves subtracting cash disbursements from your total cash revenue. You can carry over any balance from the previous month and add it to your total cash revenue.
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