Revenue or sales-biggest estimation that drives everything

Reference no: EM133655494

Question

Revenue, or sales, is the biggest estimation that drives everything, not only on the income statement but also the balance sheet. The projection of revenue determines if a company needs additional assets, and that leads to projections for how the assets are financed and projections of liabilities. Inventories are driven by revenue projections (read about Target and how excess inventory based on wrong projections have significantly set back the company's financial performance and the stock), hiring decisions, cost budgeting, cash flow and basically everything and anything is impacted by revenue projections. That is why revenue projections have such outsized impact on proforma creation and if that is not done right, too high or too low, it will have a domino effect that can have dire financial consequences for a company. This can also have dire legal and reputation con sequences for a company. Were they just incompetent, were they just wrong, or were they lying? These are questions with billion dollar implications.

Reference no: EM133655494

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