2.2.1 sales forecasting Flashcards
what is time series analysis
time series analysis involves predicting future levels of sales from past data
what are the 3 main methods of sales forecasting
- extrapolation
- correlation
- confidence intervals
what does extrapolation mean
extrapolation uses trends established from historical data to forecast the future
what are moving averages
they take a data series and smoothes the fluctuation in data to sow an average
what were moving averages aim
the aim is to take out the extremes of data from period to period
what are some advantages of using extrapolation
- a simple method of forecasting
- not much data required
- quick and cheap
what are the disadvantages of using extrapolation
- unreliable if there are significant fluctuation in historical data
- assumes past trends will continue into the future
- ignores qualitative factors (e.g changes in tastes and fasions)
what is correlation
correlation looks at the strength of a relationship between 2 variables
what are the 3 types of correlation
- positive correlation
- negative correlation
- no correlation
what does positive correlation mean
a positive relationship exists where as one variable increases in value ,so does the other variable
what does negative correlation mean
a negative relationship exists where as one variable increases in value, the other variable falls in value
what does no correlation mean
there is no discernible relationship between the variables
what does the line of best fit indicate
it indicates the strength of the correlation
what does strong correlation mean
that there is little room between the data points and the line
what does weak correlation mean
it means that the data point are spread quite wide and far away from the line of best fit
what does confidence intervals and levels mean
a confidence interval gives the percentage probability that an estimated range of possible values in fact includes the actual value being estimated
how does confidence intervals help a business
it helps by evaluating the relaibility of a particular estimate
what fators affect sales forecasts
- consumer trends
- economic variables
- actions of competitors
what does consumer income mean
the money peopel have left to spend once they have paid outstanding debts e.g bills
