1.  The Nature of Financial Projections

An entrepreneur, and any analyst who attempts to project the future, will schedule future financial activities as accurately as he can.  Every projection will constitute an estimate of financial expectations, inherently limited by educated guesswork and approximation.  Errors in judgment and assumptions constitute an integral part of all financial projections.

Nevertheless, financial projections, using modeling assumptions, must be performed in order to force the planner to think carefully about what he expects to undertake.  In addition, financial projections will constitute an important consideration to potential investors, either lenders or equity investors.  The credibility of the planner will updated itself as the result of investor observations about the ultimate accuracy of projections, and will help to determine his inclination to reinvest in downstream investment opportunities.  Therefore, financial projection accuracy and reasonableness takes on great significance.