FORECASTING

FORECASTING
Forecasting is the process of making statements about events whose actual outcomes have not yet been observed Companies to determine their budgets for an upcoming period of time. Based on demand for the goods and services If events affecting a company, such as sales expectations, will increase or decrease the price of shares in company.

TYPE OF FORECASTING
Short term forecasting Long term forecasting

SHORT TERM FORECASTING

Period of less than 1 year. Sale & production policies concerned. Reduce the cost of production. Determines the price policy. Fixed sale targets. Financial requirement. Experience & information in judgment &decision making. Taking ad hoc decisions.

LONG TERM FORECASTING

Take major strategic decisions. Planning new units & expanding the existing units. Long-term financial planning. Man-power planning. Statistical techniques.

METHODS OF FORECASTING
Extrapolative Or Time-series methods Casual Or Explanatory method Qualitative Or judgmental method

EXTRAPOLATIVE OR TIME-SERIES METHODS

Time series model consists of set of observation arranged in chronological order. Examples: Hourly series (temperature recorded) Daily series (stock exchange) Weekly series (attendance) Monthly series (steel production) Annual series (national income)

 Examination past observation & estimation of future values. Change in population, consumer tastes, weather condition. These variations are grouped into 4 types. Secular trend Seasonal variation Cyclical variation Irregular variation

EXPONENTAL SMOOTHING METHOD

Forecasting horizon short (daily, weekly). Demand for the past year. Significant seasonal variation observed. Demand ratio Forecast ratio

BY PARSHU