profit-loss account 34

May 13th, 2015
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profit and loss statement describe PROFIT FORECASTING

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PROFIT FORECASTINGForecasting, particularly on a short-term basis (one year to three years), is essential to planning for business success. This process, estimating future business performance based on the actual results from prior periods, enables the business owner/manager to modify the operation of the business on a timely basis. This allows the business to avoid losses or major financial problems should some future results from operations not conform with reasonable expectations. Forecasts - or Pro Forma Income Statements and Cash Flow Statements as they are usually called - also provide the most persuasive management tools to apply for loans or attract investor money. As a business expands, there will inevitably be a need for more money than can be internally generated from profits.Profit forecast is the amount of profit a company expects to make at the end of the period. The monthly profit and loss forecast will consist of the following:Sales Cost of sales Gross Profit Overheads Total Overheads Miscellaneous income Net Profit FACTORS AFFECTING PROFIT FORECASTINGPreparation of Forecasts (Pro Forma Statements) requires assembling a wide array of pertinent, verifiable facts affecting your business and its past performance. These include:Data from prior financial statements, particularly:1. Previous sales levels and trends 2. Past gross percentages 3. Average past general, administrative, and selling expenses necessary to generate your former sale

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