While forecasting the total financial condition of the firm, the first step is to forecast individual financial variables. These forecasts are then combined into a forecast of the complete balance sheet. In the present section, the various approaches to the forecast of individual variables will be dealt with, while the succeeding section will show how they are combined into an integrated forecast.
The most important ingredient in the firm’s planning process is the forecast of sales. It is the sales forecast that forms the basis for the forecast of other variables. The projection of sales in the coming years depends on: