Final answer:
Financial projections are estimates of financial statements based on assumptions about future revenues, expenses, investments, financing, and working capital management.
Step-by-step explanation:
Financial projections are projections of financial statements that are based on a set of assumptions about future revenues, expenses, investments in assets, financing methods and costs, and working capital management. These projections are typically used by businesses to forecast their financial performance and make informed decisions.
For example, a company may create financial projections for the next five years based on assumptions about potential sales growth, cost management strategies, and financing options. These projections can help the company assess its financial health, plan for future investments, and evaluate the feasibility of various business strategies.
It's important to note that financial projections are not guaranteed outcomes, but rather estimates based on assumptions and expectations. Actual financial performance may differ from the projections due to various external factors and uncertainties.