In the accounting world, the terms ‘financial forecast’ and ‘financial projection’ are often used interchangeably, even by financial professionals who should have known the difference.
Financial forecasting predicts a company’s performance, assuming no change in a business environment. A startup can use financial forecast in line with financial projection to determine company performance in a single or multiple future scenarios. As illustrated in the above figure, a forecast is calculated using management’s judgment of the most probable future scenario, whereas a projection allows for a mix of scenarios.
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