Answers / FP&A

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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