What’s the difference between a forecast and a target?
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 realistic prediction of what WILL happen based on current trajectory and known information. A target is what management WANTS to happen – aspirational. FP&A should produce honest forecasts, not political targets. If there’s a gap between forecast and target, that gap is the ‘management action required.’
WHAT INTERVIEWERS LISTEN FOR
- ✓Forecast is realistic; target is aspirational
- ✓FP&A must provide unbiased forecasts
- ✓Gap between forecast and target indicates needed management action
COMMON MISTAKES
- ✗Confusing forecast with target
- ✗Adjusting forecast to match target politically
- ✗Ignoring the gap between forecast and target
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