3.3 Quantitative sales forecasting Flashcards
Why forecast sales?
Vital for planning activity
Forms parts of other business planning
Helps focus market research
Extrapolation
uses trends established from historical data to forecast the future.
Benefits of extrapolation
Simple
Not much data required
Quick and cheap
Drawbacks of extrapolation
Unreliable if significant fluctuations in historical data
Assumes past trends will continue into the future which is unlikely
Ignores qualitative factors
Correlation
strength of relationship between two variables.
Independent
causes the dependent to change.
Dependent
influenced by independent variable.
Positive correlation
Both increase
Negative correlation
Independent increases, dependent decreases.
Strong line of best fit
little room between data points and line.
Weak line of best fit
points are far away from line.
Moving averages
A statistic that captures the average change in a data series over time.
What do moving averages enable
Allows analysts to spot patterns.
What is duration used for moving averages?
Four to Twelve month averages
Moving total
Adding together sales figures for a specified number of periods.
