Financial projections are one of the most useful decision making tools that individuals and management have at their disposal. Projections provide the opportunity to anticipate the outcome of alternative courses of action before investments are made.
Projections are useful for evaluating best and worst case scenarios and performing sensitivity analyses. When possible a model is developed using historical financial performance and then that performance is extrapolated into a set of financial forecasts. From there we can make adjustments to the model based on certain expectations and assumptions and each of these scenarios are financial projections.
Make Better Decisions Using Financial Projections
In a business setting financial projections are frequently developed as part of other budgeting and forecasting activities. Unlike financial forecasts, which aim to predict the most likely outcome, financial projections provide a “what-if” analysis based on different scenarios management is considering. Our projection services can help you quantify your ambitions, avoid costly mistakes and jump on the right opportunities.
In personal financial planning, financial projections may take many forms. Best and worst case scenarios have to be considered when performing insurance planning. Our sister company, Podraza Financial Advisors, makes use of the Monte Carlo method to run the same simulation over many times using random variables in order to in order to obtain a distribution of uncertainties. Once these models are developed different cash flow scenarios can be run to determine a range of expectations for retirement and estate planning purposes.
The development of financial projections can include:
- Standard costing
- Financial modeling
- Best case / worst case scenario analyses
- Sensitivity analyses
Call us today to explore how financial projections can help you make better decisions in your business and personal life.
Financial projections are one of the most useful decision making tools that individuals and management have at their disposal. Podraza CPA can help you develop models to develop reasonable expectations for business and personal financial planning purposes.