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Understanding Forecasting Methods and Types

Forecasting is making predictions about the future based on past and present data through analysis of trends. There are different forecasting horizons including long term over 2 years, medium term from several months to 2 years, and short term from daily to months. Forecasting methods involve quantitative analysis of structured data or qualitative analysis of unstructured data like surveys. Forecasting allows companies to plan for the future by analyzing past trends and changes to make more accurate predictions. It helps businesses set goals, budget, and anticipate changes in the market. An effective financial forecast can serve as a foundation for budgeting decisions, show a company is prepared for unexpected events, and help measure the effects of financial decisions.

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Baldoza Mich Ann
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22 views7 pages

Understanding Forecasting Methods and Types

Forecasting is making predictions about the future based on past and present data through analysis of trends. There are different forecasting horizons including long term over 2 years, medium term from several months to 2 years, and short term from daily to months. Forecasting methods involve quantitative analysis of structured data or qualitative analysis of unstructured data like surveys. Forecasting allows companies to plan for the future by analyzing past trends and changes to make more accurate predictions. It helps businesses set goals, budget, and anticipate changes in the market. An effective financial forecast can serve as a foundation for budgeting decisions, show a company is prepared for unexpected events, and help measure the effects of financial decisions.

Uploaded by

Baldoza Mich Ann
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

FORECASTING

MICHELLE ANN BALDOZA


SHARRA MAE VILLAFLOR
Forecasting
 Is the process of making predictions of the future based on past and present data. This is most
commonly by analysis of trends. A commonplace example might be estimation of some variable of
interest at some specified future date. Prediction is a similar, but more general term.

FORECASTING HORIZONS

• Long term forecasting tends to be completed at high levels in the organization. The time frame is generally
considered longer than 2 years into the future. Detailed knowledge about the products and markets are required
due to the high degree of uncertainty.
• Medium term forecasting tends to be several months up to 2 years into the future and is referred to as
intermediate term.
• Short term forecasting is daily up to months in the future. These forecasts are used for operational decision
making such as inventory planning, ordering and scheduling of the workforce.
Understanding the importance of forecasting methods vs forecasting
types

 When looking at forecasting types, they help identify the target you’re pursuing.
Whereas a forecasting method is how you gather and identify that information and
data.

The common approaches to forecasting methods

 There are several forecasting techniques, the data you use to compose your forecast
falls within two general categories.
QUANTITATIVE QUALITATIVE
 Quantitative forecasting focuses on structured data, statistical analysis, and
experiments.
 Qualitative forecasting uses unstructured data. This is because it relies on interviews,
surveys, and observations.

What is the importance of forecasting?

 Forecasting allows your company to become proactive in directing its future. By


aggregating and analysing past data, predictions can be made about future trends and
changes. While possible to create forecasts without any historical data, being able to
add in as many details as possible will make forecasts more accurate.
Understanding how the importance of forecasting can
benefit your business

 Forecasting helps to set goals and plan ahead


Having accurate data and statistics to analyze helps businesses to decide what amount of
change, growth or improvement will be determined as a success
 A forecast helps businesses budget
While a budget quantifies the expectation of revenues that a business wants to achieve over
a period, a forecast is different.
 Forecasts help anticipate change within the market
By having insight into not only current data but projections of what could happen in the
future, businesses can make better adjustments.
What can an effective financial forecast do for your
business?

 No matter your company’s size or industry, financial forecasting in business can:


• Serve as the foundation for budgeting decisions due to data-driven insights
• Show that your organization has a plan and is prepared for unforeseen events that
may impact revenues and budgets
• Help measure the effects of making material financial decisions
• Prepare a company for the best and worst-case scenarios
• Establish control and raise awareness of a broad range of variables that can have
short- and long-term impacts
• Keep decision-makers aware of potential events that could impact performance
• Prepare companies for increases or decreases in demand
THANK YOU!!!

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