What includes both market trends and competition in relation to a business forecast?

The correct answer is rooted in the understanding of how business forecasts are developed and the components that influence them. External factors encompass elements that come from outside the organization, significantly impacting its operations and market position.

Market trends, which reflect the overall direction and momentum of a particular industry or market, are critical to forecasting as they help businesses anticipate changes in consumer behavior and preferences. Competition also falls under external factors, as it involves analyzing other businesses operating within the same market space, their strategies, strengths, and weaknesses. Understanding these elements allows a company to position itself effectively and make informed strategic decisions.

In contrast, internal factors pertain to the elements within the organization, such as its operations, policies, and resources, which do not directly involve market dynamics or competitive analysis. Financial factors focus on the monetary aspects of the business, including revenue, expenses, and profit margins but do not encompass the broader market influences. Operational factors involve the day-to-day activities necessary for the entity's functioning, which, while crucial, are again distinctly different from external competitive and market considerations.

Thus, understanding external factors correctly captures the market trends and competitive landscape that are essential for an accurate business forecast.