CHAPTER13 FORECASTING
CHAPTER13: FORECASTING
13.1|NTR○ DUCTION Typical business forecasting situations A company wishes to forecast the sales of its products Forecast the returns resulting to the company from the purchase of new equipment A local authority forecasts the number of children for the next ten years The Treasury has a large economic model that allows the investigation of the likely effects on the economy if the Chancellor changes the income tax rate, or alters the interest rate
13.1 INTRODUCTION • Typical business forecasting situations – A company wishes to forecast the sales of its products – Forecast the returns resulting to the company from the purchase of new equipment. – A local authority forecasts the number of children for the next ten years – The Treasury has a large economic model that allows the investigation of the likely effects on the economy if the Chancellor changes the income tax rate, or alters the interest rate
13.1.1 Approaches to Forecasting If the company has available the month sales figures for its products for the previous twelve months then this information can be used to make a forecast of sales for the next month
13.1.1 Approaches to Forecasting • If the company has available the monthly sales figures for its products for the previous twelve months then this information can be used to make a forecast of sales for the next month
750 600 550 45 To forecast the sales for the next three time points: projecting the sales trend line
To forecast the sales for the next three time points: projecting the sales trend line
projecting the sales trend line is not so simple Intuitively any forecast made from this data would be less reliable
• projecting the sales trend line is not so simple • Intuitively any forecast made from this data would be less reliable