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Projecting Financial Statements
There are so many factors that make a business: its CEOs, economy, competition, trust, employees, customers and their financial positions, political policies, depreciating assets, pandemics, increased revenues, accounts payable, etc.. When we rang in the new year January 2020, the world, and its businesses, had no idea what hardships, trials, and sacrifices they were about to go through. March 2020 American citizens were being told of this “global pandemic” and were instructed that a stay-at-home order was in effect. Schools, businesses, restaurants, and workplaces were forced to shut down for “two weeks.” That is until COVID-19 took off in America. Auerback and Gale note that “COVID-19 has created significant changes in almost all aspects of the economy” (Auerbach & Gale, 2020, para. 1). Businesses were struggling to pay for rent and utilities as they were forced to shut down, turning to new methods of sales and being creative: online sales, pick up orders, take out, etc.. No one could have predicted COVID-19’s effect on business and their future financial position.
Public policy and political unrest greatly affect the future positions of business that reside, partner, and trade with that nation. Oftentimes governments utilize public policies to aid other nations as some policies “offer institutional support to cross-border E-business are processed in the development of export at emerging markets” (Huo et al., 2018, para., 1). Author Huo argues that public policy can be very beneficial to both parties “innovative institutional support that delivers a flexible regulatory policy can be helpful to companies involved in export trade” (Huo et al., 2018, para., 7).
Finally, competitors will continue to affect the future of other businesses unless there is a monopoly, and “there is a single supplier of a good and no feasible way for competitors to enter the market” (Resvine et al., 2020, p. 8-23). The impact of competition is ever changing and business leaders must constantly be studying ways to gain a competitive advantage in our quick economy. There is no doubt that “product recalls hurt the recalling firm’s market value” but it has been studied that “the negative spillover effect is buffered or attenuated by the corporate product reliability of the competitor” (Liu & Varki, 2021, para. 1). Simply put, “the negative spillover effect of a recall on a competitor’s market value can be detected even when the competitor makes a positive announcement in the form of a new product pre-announcement (NPPA) after a recall in the industry” (Liu & Varki, 2021, para.1). This is just one of the many reasons why businesses need to constantly be up-to-date on recent trends, recalls, economic change, etc..
There are so many factors that influence a company’s financial statement in the next three years. Some influences can be predicted, like the influence of corporate social responsibility and depreciating assets, and others cannot, like an unforeseen global pandemic. As businesses we can do our best to predict the future state of our businesses, but we must remember who is in ultimate control. Proverbs says “many are the plans in a person’s heart, but it is the Lord’s purpose that prevails” (New International Version, Proverbs 19:21). Let us remember that God is in ultimate control, therefore, may everything that we do be for the glory of God.