Interrelationships among historical data, the forecasted income statement, and the forecasted balance sheet are all used to estimate each line item in the financial statements The sales forecast is the foundation on which much of the rest of the forecast is built.

Thus, the sales forecast is completed first. Historical sales data and any other information on the firm, its products, the economy, its customers, and its competitors are all used to create the most accurate sales forecast possible

forecast — an estimate of future performance based on historical performance and other contextual information. sales forecast — the foundation on which much of the rest of the forecast is built. balance sheet — a financial statement that reflects a firm’s asset, liability, and equity account balances at a given point in time. income statement — a financial statement that measures a firm’s financial performance over a given period of time.