Chapter 3

Question 1

What do revenue forecasts predict?

Answer 1

The expected income in a future period

Question 2

Name the components of the external environment

Answer 2

Economy, competition, government, technology, social

Question 3

What are the implications for management in regards to forecasting and budgeting?

Answer 3

Planning, Control/performance valuation, Assigning resources, Co-ordination/communication

Question 4

True or false: Internal information, also referred to as in-house data, is obtained from documents within an organisation.

Answer 4

True

Question 5

What are some examples of external sources of information?

Answer 5

Government statistics, trade associations, financial press

Question 6

True or false: Quotations and price lists can be both internal and external sources of information.

Answer 6

True

Question 7

Explain qualitative forecasting

Answer 7

Uses the opinions of informed experts rather than numerical data. More suitable where historical data is limited or unavailable.

Question 8

Explain quantitative forecasting/statistical forecasting

Answer 8

Uses historical data to predict future outcomes. Uses readily available data.

Question 9

What is the formula for indexing?

Answer 9

Current period’s value / base period value x 100

Question 10

Is indexing a qualitative or quantitative forecasting technique?

Answer 10

Quantitative, it uses historical data to predict future outcomes.

Question 11

Is sampling a qualitative or quantitative forecasting technique?

Answer 11

Generally considered to be quantitative but it can have qualitative characteristics.

Question 12

True or false: Indexing is used to establish trends by considering successive index values.

Answer 12

True.

Question 13

When is using indexing as a forecasting technique appropriate?

Answer 13

. there is a long time-series i.e historical data with many observations.
. the objective is to measure a change in a variable with reference to a specific period

Question 14

When is using sampling as a forecasting technique appropriate?

Answer 14

. no historical data is available
. it is costly or time consuming to sample from an entire population

Question 15

When is using moving averages as a forecasting technique appropriate?

Answer 15

. there is a long time-series i.e historical data with many observations.
. the data is subject to seasonal variation

Question 16

When is using linear regression as a forecasting technique appropriate?

Answer 16

. there are 2 or more variable with a casual relationship
. there are semi-variable costs to be forecast

Question 17

When is using seasonal trends as a forecasting technique appropriate?

Answer 17

. The product/service has seasonal patterns

Question 18

What is the forecast formula?

Answer 18

Trend ( 1 + x%) where x is the seasonal variation.

Question 19

Which 2 forecasting techniques can be expressed as percentages?

Answer 19

Moving averages and seasonal variation.

Question 20

Which forecasting technique is used to calculate the trend of sales?

Answer 20

Moving averages.

Question 21

True or false: Linear regression is used to establish a relationship between a dependent variable and 1 or more indepdendent variables.

Answer 21

True.

Question 22

Linear regression can be expressed as what equation?

Answer 22

Y = a + bx

Question 23

What do the variables in the linear regression equation represent?

Answer 23

Y = the dependent variable, the one we want to explain.
x = the independent variable, the one that explains y.
a = the intercept on the y-axis.
b = the slope of the line.

Question 24

What is the difference between random and quota sampling?

Answer 24

Random sampling does not take into account an individuals attributes (e.g race, gender, age) while quota sampling does.