What is the difference between a forecast and a target, and how do you ensure that these two concepts are aligned in a company's planning process?
A core FP&A interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
A forecast is a prediction of future outcomes based on historical data and trends, while a target is a desired outcome. I would ensure alignment by establishing clear communication between forecasting and target-setting teams, and by using rolling forecasts to regularly update targets based on changing business conditions.
WHAT INTERVIEWERS LISTEN FOR
- ✓Forecast vs. target
- ✓Alignment in planning process
- ✓Rolling forecasts
COMMON MISTAKES
- ✗Lack of understanding of forecast and target concepts
- ✗Inability to ensure alignment
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