4.3 Sales forecasting (HL)

Question 1

1. What is meant by sales forecasting?

Answer 1

Sales forecasting is a quantitative management technique used to predict a firm’s level of sales over a given time period.

Question 2

2. What are correlation and extrapolation?

Answer 2

Extrapolation: a forecasting technique used to identify the trend by using past data and extending this trend to predict future sales.
Correlation: shows the degree to which two sets of numbers or variables are related.

Question 3

3. How can market research assist sales forecasting?

Answer 3

Identifying and forecasting the buying habits of customers.

Question 4

4. Distinguish between seasonal, cyclical and random variations.

Answer 4

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