Explain the components and factors of financial forecasting.

Answer 4A(ii) The following components and factors should be considered and incorporated for financial forecasting. Define the purpose of financial forecasting. Collection of historical data and accuracy of data sources. A forward looking time horizon (12-18-25 month span). Formulate to determine how much weight to give any piece of data. Consideration of internal and micro economic risk. Best/Worst case scenario. Selection of financial forecast method. Documentation/ monitoring/ Analysis of data.