Forecasting (in Managements)
Forecasting is the process of projecting past sales demand into the future. Implementing a forecasting system enables you to assess current market trends and sales quickly so that you can make informed decisions about the operations. You can use forecasts to make planning decisions about: Customer orders.
Importance of Forecasting
Types of Forecasting
● Similar to market research, the Delphi method of financial forecasting sources its data from experts who can speak knowledgeably on the subjects being .
● Moving averages are a smoothing technique that looks at the underlying pattern of a set of data to establish an estimate of future values.
● This is the second well known method to produce a smoothed Time Series. Exponential Smoothing assigns exponentially decreasing weights as the observation.
● There are three basic types—qualitative techniques, time series analysis and projection, and causal models. The first uses qualitative data (expert opinion)
● Drift Method - Allowing predictions to rise or decrease over time is a variant on the nave process, with the amount of change over time (called the drift) .
● Simple Linear Regression ... Regression analysis is a widely used tool for analyzing the relationship between variables for prediction purposes.
● A company uses multiple linear regression to forecast revenues when two or more independent variables are required for a projection.
Tools of Forecasting
Top business forecasting tools
- Cash flow statements.
- Expert reports.
- Industry association reports.
- Internal assessments.
- Modeling tools.
- Organization charts.
- Performance indicators.
- Production charts.
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