Financial Forecasting Statements And Quality Accounting Assignment

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Business Finance


1. Discussion Topic:


  • What are the key assumptions and principles used in forecasting....etc (see attachment)

2. Writing asssg.

Based on the requirements of the Sarbanes-Oxley Act and SEC reporting requirements for publicly traded companies...(see attachment)

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Financial Forecasting
Student’s Name



Financial Forecasting

The two main assumptions in financial forecasts are the income and expense
assumptions. These assumptions are made based on past and current experiences or
simply from speculation without data (Wahlen, Baginski, & Bradshaw, 2014). The
principles of financial forecasting include being free of bias in a way that it can produce
reliable information. By all means, it should avoid wishful thinking, and it should also be
comprehensive, covering all the expected future activities. Another principle is that the
assumptions should be internally valid. Additionally, the assumptions should pass the test
of external validity of common sense and reality checks to make a reliable forecast
(Wahlen, Baginski, & Bradshaw, 2014).
The primary drivers of gaps between financial forecast and actual results include
bad data (Wahlen, Baginski, & Bradshaw, 2014). If the data collected during the financial
forecast is not articulate, the actual results can be very different from the forecast. The
second driver of gaps is modeling errors. If a firm uses DCF where the LBF model could
work better, there can arise parity between the forecast results and the actual results.
Additionally, errors in the data structures used in forecasting can cause parities. In other
cases, the actual results may inherit structures that have changed since the forecast,
leading to parity between the forecast and the actual result (Wahlen, Baginski, &
Bradshaw, 2014).
Forecasting is important because it assists a firm to predict the future, which is
relevant for a business that is seeking to get the most out of a changing marketplace.
Forecasting also assists business to keep customers happy. This is because forecasting
uses real data to predict what the customers want and might want in the near future, thus



ensuring that the new products are customer satisfying (Wahlen, Baginski, & Bradshaw,
2014). In this case, customers get their preferred quality and in the right quantities.
Moreover, financial forecast assist companies learn from the past, since the data collected
brings forth essential lessons that can assist the firm avoid past mistakes and capita...

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