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5 Types of Financial Projections (FP&A)

1. Budget:
Budget creates a baseline to compare actual results and dete rmine how the results vary from the expected performance. Master Budget includes 3 components the Operating Budget, Cash Budget and the Capital Budget.

2.Annual Operating Plan (A.O.P):
Annual operating plan is broader than the budget and provides a practical outline of company’s targets and key activities. While the Budget is a major part of A.O.P which ensures that we have the necessary resources to carry out planned activities

3.Forecast or Business Outlook (B.O) or Latest Estimate (L.E):
Forecasts are the very latest estimates of company's future financial outcomes by examining historical data. It illustrates whether the company is reaching its budget (target) or not in the near future.

4.Long Range Projections:
Longrange projections are required to evaluate business decisions like acquisitions or evaluation of strategic plans and alternatives. These projections will have a horizon of 2 to 7 or more years.

5.Capital Investment Decisions (CID’s):
These are evaluations for decisions like investing in a new piece of equipment, launching a new product, decisions such as lease v/s buy, produce inhouse v/s outsource etc.

5 Types of Financial Projections
Financial Projections
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