3.3.1 Quantitative Sales Forecasting

Question 1

Centring

Answer 1

A method used in the calculation of a moving average where the average is plotted or calculated in relation to the central figure.

Question 2

Correlation

Answer 2

The relationship between two sets of variables

Question 3

Correlation coefficient

Answer 3

A measures of the extent of the relationship between two sets of variables

Question 4

What is a moving average

Answer 4

A succession of averages derived from successive segments ( typically of constant size and overlapping) of a series of values

Question 5

What is a Scatter graph

Answer 5

A graph showing the performance of one variable against another independent variable on a variety of occasions. It is used to show whether a correlation exists between the variables.

Question 6

What is a time series Analysis

Answer 6

A method that allows a business to predict future levels from past figures.

Question 7

What are the four main components that a business want to identify in a time series data?

Answer 7

• trend
• seasonal fluctuations
• cyclical fluctuations
• random fluctuations

Question 8

Why does a business need to analyse a trend ?

Answer 8

Identifying the trend allows the business to predict what it is likely to happen in the future

Question 9

Correlation coefficient of +1

Answer 9

A correlation coefficient of plus one means that there is an absolute positive relationship between the two variables. All points in the scattergraph fall on the line of best fit and the lion sleeps upwards from left to right. As the values of independent variables valves increases so does dependant variable values.

Question 10

Correlation coefficient of 0

Answer 10

A correlation coefficient of zero means that there is no relationship between the values

Question 11

Correction coefficient of -1

Answer 11

A correlation coefficient of minus one means that there is an absolute and negative relationship between the two variables. All points in a scattergraph full on the line of best fit at the lion sleeps downwards from left to right as the values of the independent variable increase the values of the dependent variable fall.

Question 12

What is quantitative sales forecasting? (QSF)

Answer 12

• QSF is a statistical technique which uses data to make predictions about the future (in terms of sales not the weather etc)

Question 13

What can a business do with QSF information?

Answer 13

• Once a business has carried out time series analysis they will use this information to;
• Organise production
• Organise resources in the business e.g. employees, premises, raw materials
• Organise marketing to back up the sales predictions

Question 14

Limitations of quantitative sales forecasting techniques

Answer 14

• Past performance is no guarantee of the future
• Businesses need to appreciate the SWOT and PESTLE factors that may affect future predictions, for example;
• Weather
• Trends
• Competitor activity
• Terrorist activity

• Relies on what has happened in the past continuing to happen, and historical data is not always a good indication of what might happen in the future