4.3 Sales Forecasting

Question 1

Define sales forecasting

Answer 1

quantitative too used to predict a firms future sales revenue over a period Using past data & trends.
Helps businesses plan operations, budgets & marketing strategies.

Question 2

State 3 challenges of sales forecasting

Answer 2

✖️less reliable on the long-term
✖️costly & time consuming
✖️vulnerable to external shocks (recessions, pandemics

Question 3

State 5 advantages of sales forecasts

Answer 3

reduces risk (greater confidence in decision-making)
Improves budgeting & cash-flow
Anticipates trends = easier to respond to demand changes
helps resource planning (staff & raw materials)
Reliable forecasts improve investors trust

Question 4

Define an describe seasonal variations

Answer 4

predictable changes in sales that occur at specific times of the year due to environment, cultural or social factors

• occur regularly
• Easy to anticipate + useful for short-term planning
• Eg, ice cream in summer and umbrellas in rainy seasons

Question 5

Define and describe cyclical variations

Answer 5

sales changes that follow the economic or business cycle - including periods of boom, recession, recovery & growth

-harder to predict
-Affects most industries over the long term (can last years)
-Eg, car/holiday sales rise during economic booms

Question 6

Define and describe random variables

Answer 6

unpredictable changes in sales caused by unexpected or rare events that cannot be planned for

• irregular & sudden
• Can drastically affect sales forecasting accuracy
• Business can’t anticipate /control these
  Eg. Covid