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Finance: What are Financial Projections? 96 Views
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Description:
Financial projections are calculations for profit and loss after factoring in expenses, gross revenues, cash flow, debt, and a host of pertinent financial circumstances that apply to a particular company and/or project. The projections may be broken down into micro level, as daily and weekly...to macro level, as 5 to 10 years+. Financial projections are key to managing expectations, and for managerial decisions that will affect risk, speed of growth, schedules for different project implementation steps, and many other project management related criteria. They are also key to assessing how long a company in an industry with a long pre-revenue cash burn R&D period, such as Biotech, may take to finally become profitable. Most public companies’ stock prices are very dependent upon quarterly projections and whether or not the company surpassess, falters, or meets the projected numbers that analysts have calculated and published.
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Transcript
- 00:00
Finance allah shmoop what Our financial projections Well they're guesses
- 00:07
okay educated guesses we presume data is assembled reviewed and
- 00:12
then a crystal ball is gazed into And while projections
- 00:15
are made in the case of mature companies with long
- 00:19
cycle businesses the projections are often extremely educated and accurate
Full Transcript
- 00:27
Yeah think about boeing's projected jet engine sales Well the
- 00:32
company takes three to four years just to set up
- 00:34
a fabrication run of a new style of engine and
- 00:38
they're working with rolls royce to do it Rolls royce
- 00:40
makes jet engines along with cars Their orders come in
- 00:43
and while they were partly paid for already and the
- 00:46
company knows it will produce somewhere between two hundred two
- 00:49
hundred fifty engines next year two hundred fifty two three
- 00:53
hundred engines following here and three hundred three hundred fifty
- 00:56
engines the year after that And yes there is some
- 00:58
variability and revenues But if the company produces fewer engines
- 01:02
well they'll have fewer costs as well So the range
- 01:05
they predict for profitability is pretty narrow That is they'll
- 01:09
have operating profit somewhere between eighty and ninety million bucks
- 01:14
each year Going up a little bit the next few
- 01:17
years That's The financial projection anyway can a bomb go
- 01:20
off in the factory or rather someone is smoking around
- 01:23
the fuel depot and then you know glam Yep that
- 01:26
can happen Is it likely No but it can And
- 01:29
it would really throw off the projections Right So projection
- 01:32
Is just a projection it's not a guarantee it's a
- 01:34
guess with other companies while like much younger ones projections
- 01:38
are well way more of a guess At the other
- 01:41
end of the rainbow from the boeing rolls royce jet
- 01:44
engine thing there's a brand new company just called rolls
- 01:47
it's an e bike company with assisted pedaling so that
- 01:51
riders feel like they're somewhere between superman and lance armstrong
- 01:56
You know the steroid guy company has had early success
- 01:59
having sold two thousand bike models off their website for
- 02:03
two grand each they're about to raise twenty million dollars
- 02:06
in venture capital funding Tio go big so now the
- 02:09
projections get really vague Will the company sell a million
- 02:12
bikes in three years Well that's what the founders think
- 02:15
but they're enthused and young for the company only sell
- 02:18
ten thousand bikes in three years Sure if they meet
- 02:21
the former projection they're billionaires If they meet the ladder
- 02:25
they're bankrupt Either way they can project with certainty that
- 02:29
their outcome begins with a b generally speaking the more
- 02:32
mature the industry and product the narrower or more accurate
- 02:36
the financial projection with startups who have no history Well
- 02:40
one never knows if they're projecting growth in the future 00:02:43.065 --> [endTime] like google or shmoop Come on
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