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Projected financial statements are prepared using financial statements which act as a base for evaluating the operating performance of a company and help in to make a better decision. To begin with, the balance sheet helps in determining the financial state of a company at a particular time. The balance sheet is crucial in strategic financial planning because I will use it to determine whether the company finances are accurately managed. I will use it to summarize the company’s assets, liabilities, and owners’ equity and weigh what the company owns and owes. For instance, a very high level of current liabilities may be an indication that the company cannot meet its daily expenses (Foster, 2008).
The income statement will guide me in determining the institution financial performance over a given period and determine whether the institution has been operating on loss or profit and take actions if the company is operating at a loss. For instance, I may advise on minimizing the total expenses if possible. The income statement will portray the company’s operation performance.
The cash flow statement, on the other hand, will guide in determining where cash is collected from and how it is used. Cash flow helps in classifying the money generated or used either in the operating, financing or investing activities. In the long run, cash flow financial statements help in ensuring optimum use of funds for the benefit of the enterprise. It will as well assist in determining whether the company can meet its obligations such as loan payments (Sangram, 2016).
References
Foster, G. (2008). Financial Statement Analysis, 2/e. Pearson Education India.
Sangram, P. (2016). Cash Flow Statement: Meaning, Features, Objectives and Importance. Retrieved from http://www.yourarticlelibrary.com/accounting/cash-flow-statement/cash-flow-statement-meaning-features-objectives-and-importance/65271/