My Financial Projection

​My Financial Projection

By Milena Alvarez

Agenda

• Understanding Finacial Projections and Financial Forecasts

• What is Financial Projection?

• What is Financial Forecast?

• Key differences between Financial Projection vs. Financial Forecast

• Example of Financial Projection

• Example of Financial Forecast

• Creating a financial forecast

• Creating a financial projection

• Examples of real world applications

• Short checking your understanding quiz

Understanding Finacial Projections and Financial Forecasts

• Both are tools businesses use for financial planning

• Help businesses make decisions about future operations

• Allow businesses to set goals and prepare for different scenarios

• Critical for 11th graders to understand as future entrepreneurs or business professionals

• Aligned with mathematics standards for modeling with functions and data analysis

What is a Financial Forecast?

• A statement of management's expectations

• Based on what management reasonably expects will happen

• Uses current and past financial information to create a realistic picture

• Published by public companies for stockholders and general public

• Used to develop budgets, financial plans, and determine hiring needs

• Relies on historical data, operational costs, and market activity

• Shows the most likely future scenario based on existing trends

What is a Financial Projection?

• Projects the likely outcome of hypothetical scenarios or assumptions

• A tool to explore business and market scenarios before adjusting plans

• A snapshot of a possible business outcome weighted by probability

• Shows financial impacts of "what if" scenarios

• Focuses on desired outcomes regardless of external factors

• Sets future objectives like expansion, growth, or profit

• Can calculate multiple projections simultaneously for different scenarios

Key Differences Between Financial Forecast and Financial Projection?

Financial Forecast	Financial Projection
Expected outcomes	Assumed/desired outcomes
Based on historical data	Based on hypothetical scenarios
What will likely happen	What could happen under certain conditions
Used for budgeting	Used for strategic planning
More realistic/conservative	Can be more aspirational
Required for public companies	Used internally for planning

Example: Financial Forecast ABC Clothing Store Forecast

Based on 3 years of sales data showing 5% annual growth

Current annual revenue:	$500,000​
​​Current expenses:	$350,000​
​Forecasted revenue next year:	$525,000 (5% increase)​
​Forecasted expenses next year:	$367,000​ (5% increase)
Forecasted profit:​	$157,000​

Multiple Choice

Is this a forecast or projection?

• Forecast

• Projection

Example: Financial Projection XYZ Tech Startup Projection

New product launch scenario

Current annual revenue:	$200,000​
​​Projected revenue with new product:	$500,000​
Current expenses:	$150,000
​Projected expenses with new product:	$300,000
Projected profit:​	$200,000​

Multiple Choice

Is this a forecast or projection?

• Forecast

• Projection

Creating a Financial Forecast

1. Evaluate past revenue and expenses

• Review financial statements

• Identify trends in sales and costs

2. Determine financial needs

• Calculate expected growth

• Plan for operational expenses1.

3. Plan for different circumstances

• Consider market changes

• Account for economic factors

4. Determine projected expenses

• Estimate costs based on planned operations

• Include all operational expenses

Creating a Financial Projection

1. Set desired outcomes

   • Define growth targets

   • Establish profit goals

2. Create hypothetical scenarios

   • New product launches

   • Market expansion

   • Changes in operations

3. Calculate financial impacts

   • Revenue changes

   • Cost implications

   • Cash flow effects

4. Develop a plan of action

   • Marketing strategies

   • Operational changes

   • Investment needs

Real World Applications

​Business Planning

• Startups use projections to secure funding

• Established companies use forecasts for budgeting

• Both tools help with strategic decision-making

Multiple Choice

Identify whether each scenario requires a forecast or projection:

A restaurant planning next month's inventory based on past sales

• Projection

• Forecast

Multiple Choice

Identify whether each scenario requires a forecast or projection:

A tech company estimating performance if they enter a new market

• Projection

• Forecast

Multiple Choice

Identify whether each scenario requires a forecast or projection:

A retail store predicting holiday sales based on previous years

• Projection

• Forecast

Multiple Choice

Identify whether each scenario requires a forecast or projection:

A manufacturer considering the impact of adding a new product line

• Projection

• Forecast

Multiple Choice

Scenario 1: A small business has operated for 5 years and wants to plan next year's budget using past performance data.

• Projection

• Forecast

Multiple Choice

Scenario 2: A company wants to evaluate what would happen if they doubled their marketing budget.

• Projection

• Forecast

Multiple Choice

Scenario 3: A public company is publishing expected earnings for shareholders.

• Projection

• Forecast

Multiple Choice

Scenario 4: An entrepreneur is creating a business plan for a bank loan for a new venture.

• Projection

• Forecast