Projected financial statements incorporate current trends and expectations to arrive at a financial picture that management believes it can attain as of a future date. At a minimum, projected financial statements will show a summary-level income statement and balance sheet. This information is typically derived from a revenue trend line, as well as expense percentages that are based on the current proportions of expenses to revenues.
A better set of projected financial statements will incorporate the following features:
- A statement of cash flows
- Expense projections that include step costs for major points at which revenues increase or decline
- Consideration of the pace at which the business can reasonably grow, based on its prior history
- Consideration of the corporate bottleneck operation on the ability to grow
- The ability of the business to attract the funding needed in order to accomplish the financial results stated in the plan