Question

Financial planning usually begins with the preparation of a _______ forecast.

• A. purchase
• B. sales
• C. cash
• D. budget

Answer 1

The correct option is B sales

Financial planning usually begins with the preparation of a sales forecast.

It starts with an estimate of the sales which are likely to happen in the next five years. Based on these, the financial statements are prepared keeping in mind the requirement of funds for investment in the fixed capital and working capital. Then the expected profits during the period are estimated so that an idea can be made of how much of the fund requirements can be met internally i.e. through retained earnings. This results in an estimation of the requirement for external funds. Further, the sources from which the external funds requirement can be met are identified and cash budgets are made, incorporating these factors.