What is the main purpose of financial projection statements?

The main purpose of financial projection statements is to estimate future financial performance. These statements serve as a tool for management, investors, and stakeholders to visualize how a company expects to perform based on current trends, market conditions, and strategic plans. By forecasting revenues, expenses, and ultimately profits, financial projections help businesses plan and allocate resources effectively. They are critical in setting financial goals, making informed decisions, and evaluating potential investments.

In addition to guiding internal decision-making, financial projections can also be essential for attracting investors, as they provide insights into future profitability and growth potential. They allow companies to set realistic targets and adjust their strategies as needed. Understanding future performance is crucial for maintaining financial health and ensuring long-term sustainability.