20 Financial Forecasting Key Terms in Business

20 Financial Forecasting Key Terms in Business

20 Financial Forecasting Key Terms in Business



Welcome to our guide on financial forecasting key terms in business! If you’re new to the world of finance, this may seem like a daunting topic. But fear not, we will break down these key terms in a conversational and easy-to-understand manner.




  1. Financial Forecasting: The process of estimating or predicting how a business will perform in the future.


  2. Revenue Forecasting: Estimating future revenue over a specific period, based on historical data and analysis.


  3. Expense Forecast: Projecting future costs and expenses of a business over a specified period.


  4. Cash Flow Forecasting: Predicting the amount of money that will flow in and out of the business, including both revenues and expenses.


  5. Budget: A detailed financial plan for a specific period that includes estimated revenues and expenses.


  6. Variance Analysis: The process of comparing actual financial results with those forecasted and analyzing the reasons for any differences.


  7. Pro Forma Financial Statements: Financial statements based on hypothetical scenarios or assumptions.


  8. Break-Even Analysis: Calculating the point at which revenue equals the costs associated with earning that revenue.


  9. Scenario Planning: The process of creating and analyzing various possible future states of the market or company.


  10. Sensitivity Analysis: A technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumptions.


  11. Capital Expenditure (CapEx) Forecast: Predicting future capital expenditures required to maintain or grow the business.


  12. Operating Expense (OpEx) Forecast: Estimating the costs required for the day-to-day functioning of the business.


  13. Sales Forecasting: The process of estimating future sales volumes over a given period.


  14. Balance Sheet Forecasting: Projecting the future financial position of a company, showing expected assets, liabilities, and equity.


  15. Income Statement Forecasting: Estimating future income, expenses, and profits over a specific time period.


  16. Rolling Forecast: A type of forecast which is continuously updated as new data becomes available.


  17. Discounted Cash Flow (DCF): A valuation method used to estimate the value of an investment based on its expected future cash flows.


  18. Economic Indicators: Statistics about economic activities that help forecast future financial performance.


  19. Financial Modeling: The process of creating a summary of a company’s expenses and earnings in the form of a spreadsheet that can be used to calculate the impact of a future event or decision.


  20. Top-Down & Bottom-Up Forecasting: Top-down involves making macro-level forecasts and then breaking them down, while bottom-up starts at the micro-level and aggregates them.




Understanding these terms is crucial for anyone involved in business finance, as they are foundational to making informed and strategic financial decisions and predictions about a company’s future.

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