Theme 3 Topic 6 - Quantitative Sales Forecasting

Question 1

Define Sales Forecasting

Answer 1

Estimating the likely revenues of a product over a future period

Question 2

What are three reasons a business might construct a sales forecast?

Answer 2

Identify stage in the product lifecycle, Predict stock requirements/staffing levels, Makes cash flow forecast more accurate

Question 3

Define Moving Averages

Answer 3

Looks at data over a period of time and averages out the data

Question 4

What doe moving averages identify?

Answer 4

Underlying trends by smoothing out the data which is seasonal or erratic

Question 5

What are the two types of moving average?

Answer 5

Three quarter and Four quarter

Question 6

Cyclical Variation =

Answer 6

Actual Sales - Trend

Question 7

Average Variation =

Answer 7

All the Cyclical Variations/Number of Years

Question 8

Define Extrapolation

Answer 8

Forecasting future trends by extending past data into the future

Question 9

What are two reasons extrapolation may be incorrect?

Answer 9

Assumes the future will be similar to the past, PESTLE factors

Question 10

Define Line of Best Fit

Answer 10

A line that goes roughly through the middle of all the scatter points on a graph

Question 11

Define Correlation

Answer 11

Shows the relationship between two variables, e.g. price and demand

Question 12

Define Positive Correlation

Answer 12

Two sets of data are connected and increase together

Question 13

Define Negative Correlation

Answer 13

One value decreased as the other increases

Question 14

What are three limitations of sales forecasting?

Answer 14

New businesses have no past data to look at, Past performance is no guarantee of the future, Correlation is too simplistic as it only looks at the relationship between 2 variables