What does a financial projection estimate?

A financial projection primarily estimates future revenue and expenses. This is a crucial component for businesses and individuals as it helps in budgeting and strategic planning. By forecasting income and expenditures, entities can make informed decisions regarding investments, savings, and operational adjustments. Furthermore, accurate projections can guide resource allocation and financial strategy to enhance profitability and sustainability.

In contrast, estimating future tax rates would rely on external factors such as government policy, which is not typically the focus of financial projections. Current asset values are static measurements and do not pertain to future estimations, while employee performance is an assessment of existing personnel capability rather than a financial estimation. Therefore, the choice focusing on future revenue and expenses directly aligns with the fundamental purpose of financial projections.