Points to be covered
y What is Business Forecasting? y Objectives y Characteristics y Steps in Forecasting y Methods

y It refers to analysis of past and present economic

conditions with the object of drawing inferences about probable future business conditions.

y Analyzing the past economic conditions y Analyzing the present economic conditions

y Business planning y Reduce the areas of uncertainty

y Based on past and present conditions y Based on mathematical and statistical methods y Period y Estimation y scope

Steps in forecasting
y Understanding why changes in the past have occurred y Determining which phases of business activity must

be measured y Selecting and compiling data to be used as devices y Analyzing the data

Methods : Business Forecasting
y Business Barometer y Time Series Analysis y Extrapolation y Regression Analysis y Modern Econometric Methods y Exponential Smoothing Method

Business Barometer
y Business Barometer y Types of Business Barometer

For general business activities ii. For specific business or industry iii. For individual business firm

y Advantages

Scientific and reliable ii. Proper forecasting of future trends iii. Help to forecast the speed of fluctuations
i. y Disadvantages

Difficult to construct ii. Incorrect data from source - inaccurate results

Time Series Analysis
y What is it? y Merits

Easy Method ii. Comparative study of variations can be made iii. Reliable results y Demerits i. Expensive, difficult and time consuming ii. Data of several years needed

y Extrapolation y Curves

Arithmetic trend Semi log trend Modified exponential curve

Logistic curve

y Merits

Useful to forecast future demand and production ii. Simple Method iii. Pure and reliable results
i. y Demerits

Can be used under its own assumptions only ii. Selection of trend curve difficult

Regression Analysis
‡ Consists of a dependent and an independent variable ‡ Technique used to find the equation representing the

relationship between the variables

Modern Econometric Methods
y What is Econometrics? y Merits

Use of computer hence accurate and reliable results ii. Explains various aspects of economy interrelation
i. y Demerits

Difficult and complicated ii. Needs adequate series of data

Exponential Smoothing Method
y Kind of weighted average y Used for short-term forecasting

Methods : Which One To Use?
y Based upon context y Based upon relevance and availability of data y Accuracy y Cost Benefit y Availability of time