Financial Forecasting

Strident Marks will benefit in many ways from the use of forecasting. Forecasting is "to calculate or estimate something in advance; predict the future" ("Forecast," 2004). Forecasting uses past data in order to predict or forecast the future of the company in a given time period, one year. Forecasting should be taken seriously, now more than ever, because Strident Marks is a publicly traded company and is being scrutinized already. This scrutiny will increase if the company forecasts wrong, even if it is good for the company because it shows that the company does not have enough knowledge of their business model and shows lack of care to Strident Mark's investors (CTU Online, 2007). Therefore it is imperative that Strident Marks understand how to accurately and effectively complete financial forecasting.

In order for Strident Marks to complete both forecasting and budgeting, the company must have a proper understanding of the three key financial reports: balance sheet, income statement, and statement of cash flows (CTU Online, 2007). The balance sheet is a summary of the company's financial status at a certain place in time (Gitman, 2006, p. 49). The balance sheet compares what the company owns, which are assets, to what the company owes, which is liabilities and stockholder's equity (Gitman, 2006, p. 50). The assets include cash, inventories, land, buildings, equipment, automobiles, and many other assets (Gitman, 2006, p. 50). The net assets are then subtracted by the depreciation of all the assets (Gitman, 2006, p. 50). Depreciation is "a decrease or loss in value, as because of age, wear, or market conditions" ("Depreciation," 2004). Liabilities include all the company's debts (Gitman, 2006, p. 50).