8: Financial Management, Forecasts and Trends

Question 1

what is business forecasting

Answer 1

the estimation of the value of a variable at some future point in time

Question 2

what are the two major forecasting approaches

Answer 2

qualitative forecasting: based on judgement and opinion, subjective
quantitative: based on data and models, objective

Question 3

what are the types of qualitative forecasting

Answer 3

executive opinion: using collective judgement of executives and managers
market research: employs consumer or other surveys
delphi method: develops a consensus of an expert group using a multi stage process to converge on a forecast

Question 4

what are the types of quantitative forecasting

Answer 4

time series model: using patterns in past data to predict future values
casual models: assumes the variable being forecasted is related to other variables and makes projections based on that

Question 5

what are the three time frames for forecasting

Answer 5

short term: from immediate future up to 3 months. time series method
medium term: from 3 months to 2 years. time series and casual method
long term: period longer than 2 years. casual method and qualitative methods

Question 6

simple moving average

Answer 6

The simple moving average uses an average of a specific number of the most recent periods’ actual values, without adjusting those values, as a forecast for a future period or periods.

Question 7

Exponential smoothing

Answer 7

Exponential smoothing is a technique to reduce random fluctuations in time series data with declining weights assigned to data as it becomes older.