4.3 Sales forecasting Flashcards

1
Q

What is ‘sales forecasting’?

A

a quantitative management technique used to predict a firm’s level of sales over a given tme period.

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2
Q

What are the three sales forecasting techniques?

A

Extrapolation
Market research
Time series analysis

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3
Q

Extrapolation

A

identifies the trend by using past data and extending this trend to predict future sales.

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4
Q

Market research

A

identifying and forecasting the buying habits of consumers can be vital to a firm’s prosperity and survival

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5
Q

Time series analysis

A

attempts to predict sales levels by identifying the underlying trend from a sequence of actual sales figures recorded at regular intervals in the past. there are three main elements:
seasonal variations
cyclical variations
random variations

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6
Q

Distinguish between seasonal, cyclical and random variations.

A

Seasonal variations - periodic fluctuations in sales revenues over a specified time period.
Cyclical variations - recurrent fluctuations in sales linked to the economic cycle of booms and slumps; last longer than a year.
Random variations - unpredicted variations in sales revenue

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7
Q

What factors affect the choice of sales forecasting methods?

A

how accurate forecasts need to be
how far ahead forecasts
availability and cost of data and information collection
stage in a product’s life cycle

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8
Q

What are moving averages?

A

a more accurate method of identifying trends so they are a more useful tool for sales forecasting.

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9
Q

Outline the benefits of sales forecasting.

A
Improved efficiency and productivity 
Improved working capital and cash flow 
Improved stock control
Improved budgeting
Helps to secure external sources of finance
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10
Q

Explain the limitations of sales forecasting.

A

Limited information
Inaccuracy of predictions
Garbage in garbage out
External influences

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