The financial forecasting, pro forma statements, and a cash budget all have a function that contributes to any organization success. The financial forecast is used as a tool for strategic planning for a business. Business managers use the financial forecast as an aid for them to make any business decision and how to allocate company resources that would avoid any business risk. The financial forecast also determines an estimated outcome of where an organization wants to be in the future by way of utilizing internal accounting and sales data as well as external market and economic displays. An organization that does not incorporate a financial forecast in their business could cause them to go bankrupt. On the other hand, the pro forma statements are prepared …show more content…
By using a pro forma statement along with the financial report, it can attract various people such as investors, lenders, and a business partner; do to displaying projected assets for the anticipated business growth. With a cash budget, it keeps track of all receipts, payments, and the forecast budget of funds coming in and out of the organization. The receipts are considered as cash that clarifies sales and accounts receivable for the business. The receipt cycles display the total timeframe of sold products delivered and when the consumer makes a payment. In contrast, only cash payments can be made towards appropriate expenses such as raw materials, wages, taxes, and interest. If a company purchases products through a loan from a financial institution, they have a cash disbursements payment commitment for a specific timeframe starting from the incurred interest to pay the loan off. Some of the cash payments can outflow from financing business activities such as dividend payments to shareholders, repurchase of the company's own shares, and repayment of principal and interest on the organization’s