4.3 Sales forecasting

Extrapolation

Extrapolation

________ involves basing future predictions on past results.

Sales forecasting

predicting future sales levels and sales trends

Seasonal variations

regular and repeated variations that occur in sales data within a period of 12 months or less

Cyclical variations

variations in sales occurring over periods of time of much more than a year they are related to the business cycle

Sales forecasting

Predicting future sales levels and sales trends

Extrapolation

Extrapolation involves basing future predictions on past results

Seasonal variations

Regular and repeated variations that occur in sales data within a period of 12 months or less

Cyclical variations

Variations in sales occurring over periods of time of much more than a year they are related to the business cycle

Random variations

Random variations may occur at any time and will cause unusual and unpredictable sales figures, e.g. exceptionally poor weather, or negative public image following a high profile product failure

Forecasting using the moving average method

Plot the trend (moving average) results on a time-series graph; extrapolate this into the future short-term extrapolations are likely to be the most accurate; read off the forecast trend result from the graph for the period under review; adjust this by the average seasonal variation for quarter 2

Four-period moving average

The most widely used technique as it is often employed when forecasting from quarterly data. Much macro-economic data is released quarterly, but if it’s collected as monthly sales then a 12-period moving total can be used