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                  42                                Corporate Finance                      BRILLIANT’S


                  Financial Forecasting                       \$m`Z|{e`b \$moaH$mpñQ>¨J
                      A Financial forecast is an estimate of future  EH$ \$m`Z|{e`b \$moaH$mñQ> ~mhar ~mOma, BH$moZm°{_H$
                  financial outcomes for a company or country  B§{S>Ho$Q>g© VWm Hw$N> Eo{Vhm{gH$ S>mQ>m O¡go B§Q>Z©b AH$mC§qQ>J,
                  (for futures and currency markets), using data  goëg S>mQ>m Am{X go S>mQ>m H$m Cn`moJ H$aHo$ EH$ H§$nZr `m
                  from external market, economic indicators and
                  some historical data like internal accounting,  Xoe(^{dî` VWm H$a|gr _mH}$Q²>g Ho$ {bE) Ho$ {bE ^{dî`
                  sales data etc.                             Ho$ \$m`Z|{e`b n[aUm_m| H$m EH$ AZw_mZ h¡&
                      Financial  Forecasting  describes  the      \$m`Z|{e`b \$moaH$mpñQ>¨J à{H«$`m H$m dU©Z H$aVr h¡
                  process  by  which  firms  think  about  and  {OgHo$ Ûmam g§ñWmE§ ^{dî` Ho$ ~mao _| {dMma H$aVr VWm
                  prepare for the future. The forecasting process  V¡`ma ahVr h¢& \$moaH$mpñQ>¨J à{H«$`m BgHo$ bú` VWm
                  provides the means for a firm to express its  àmW{_H$VmE§ ì`ŠV H$aZo VWm gw{ZpíMV H$aZo Ho$ {bE
                  goals and priorities and to ensure that they are  Cnm` àXmZ H$aVr h¢ {H$ do Am§V[aH$ ê$n go g§JV h¢& `h
                  internally consistent. It also assists the firm in  AgoQ> Amdí`H$VmAm|  VWm  EŠgQ>Z©b  \$m`Z|qgJ  H$s
                  identifying the asset requirements and needs  Amdí`H$Vm H$s nhMmZ H$aZo _| ^r g§ñWm H$s ghm`Vm
                  for external financing.                     H$aVr h¡&
                        Unlike  a  financial  plan  or  a budget  a  EH$ \$m`Z|{e`b ßbmZ Ho$ {dnarV EH$ \$m`Z|{e`b
                  financial forecast doesn't have to be used as a  \$moaH$mñQ> H$m EH$ ßbmqZJ S>m°Š`y_§oQ> Ho$ ê$n _| Cn`moJ Zht
                  planning document. Outside analysts can use  hmoVm h¡& ~mhar {díbofH$ AmZo dmbo dfm] _| H§$nZr H$s
                  a financial  forecast to  estimate a  company's  g\$bVm H$m AZw_mZ bJmZo Ho$ {bE \$m`Z|{e`b \$moaH$mñQ>
                  success in the coming year
                                                              H$m Cn`moJ H$a gH$Vo h¢&
                  Objectives of Forecasting                   \$moaH$mpñQ>¨J Ho$ CÔoí`
                    To reduce cost of responding to emerge-     ^{dî` H$s KQ>ZmAm| H$m nydm©Zw_mZ H$aHo$ AmnmVH$mb
                      ncies by anticipating the future occurrences.  H$m àË`wÎma XoZo H$s bmJV H$_ H$aZm&
                    Prepare  to  take  advantage  of  future    ^{dî` Ho$ Adgam§o H$m bm^ boZo Ho$ {bE V¡`ma ahZm&
                      opportunities.
                    Prepare  contingency  and  emergency        AmH$pñ_H$ VWm AmnmVH$mb `moOZmE§ ~ZmZm&
                      plans.
                    Prepare to deal with possible outcomes.     g§^d n[aUm_m| na H$m`© H$aZo Ho$ {bE V¡`ma hmoZm&

                  Steps of Forecasting                        \$moaH$mpñQ>¨J Ho$ MaU
                  Step I Establish a base year.               MaU I AmYma df© ñWm{nV H$a|&
                  Step II Assess  revenue  and  expenditure   MaU II amOñd VWm ì`` d¥{Õ àd¥{Îm`m| H$m AmH$bZ&
                         growth trends.
                  Step III Clearly  specify  underlying  assump-  MaU III {Z{X©ï> YmaUmAm| H$mo ñnï> ê$n go {ZYm©[aV H$aZm&
                         tions.
                  Step IV Select a forecasting method.        MaU IV EH$ ’$moaH$mpñQ>¨J {d{Y H$m MwZmd&
                  Step V Assess  the reliability  and validity  of  MaU V YmaUmAm| H$m {ZYm©aU H$aZo Ho$ {bE Cn`moJ
                         the data used to determine assump-           {H$`o OmZo dmbo S>mQ>m H$s {dídgZr`Vm VWm
                         tions.                                       d¡YVm H$m AmH$bZ&
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