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Forecasting Techniques for Business Planning

Learn about qualitative forecasts, survey techniques, and econometric models to predict planned plant and equipment spending, expected sales and inventory changes, consumers' expenditure plans, and more. Explore time-series analysis, trend projection, moving average, and exponential smoothing methods. Understand barometric methods and econometric models for accurate forecasting.

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Forecasting Techniques for Business Planning

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  1. Qualitative Forecasts • Survey Techniques • Planned Plant and Equipment Spending • Expected Sales and Inventory Changes • Consumers’ Expenditure Plans • Opinion Polls • Business Executives • Sales Force • Consumer Intentions

  2. Time-Series Analysis • Secular Trend • Long-Run Increase or Decrease in Data • Cyclical Fluctuations • Long-Run Cycles of Expansion and Contraction • Seasonal Variation • Regularly Occurring Fluctuations • Irregular or Random Influences

  3. Trend Projection • Linear Trend:St = S0 + b tb = Growth per time period • Constant Growth RateSt = S0 (1 + g)tg = Growth rate • Estimation of Growth Rate lnSt = lnS0 + t ln(1 + g)

  4. Actual Trend Forecast Ratio = SeasonalAdjustment Average of Ratios forEach Seasonal Period = Seasonal Variation Ratio to Trend Method AdjustedForecast TrendForecast SeasonalAdjustment =

  5. Seasonal Variation Ratio to Trend Method:Example Calculation for Quarter 1 Trend Forecast for 1996.1 = 11.90 + (0.394)(17) = 18.60 Seasonally Adjusted Forecast for 1996.1 = (18.60)(0.8869) = 16.50

  6. Moving Average Forecasts Forecast is the average of data from w periods prior to the forecast data point.

  7. Exponential SmoothingForecasts Forecast is the weighted average of of the forecast and the actual value from the prior period.

  8. Root Mean Square Error Measures the Accuracy of a Forecasting Method

  9. Barometric Methods • National Bureau of Economic Research • Department of Commerce • Leading Indicators • Lagging Indicators • Coincident Indicators • Composite Index • Diffusion Index

  10. Econometric Models Single Equation Model of the Demand for Cereal (Good X) QX = a0 + a1PX + a2Y + a3N + a4PS + a5PC + a6A + e QX = Quantity of X PX = Price of Good X Y = Consumer Income N = Size of Population PS = Price of Muffins PC = Price of Milk A = Advertising e = Random Error

  11. Econometric Models Multiple Equation Model of GNP Reduced Form Equation

  12. Input-Output Forecasting Three-Sector Input-Output Flow Table

  13. DirectRequirements Input RequirementsColumn Total = Input-Output Forecasting Direct Requirements Matrix

  14. Input-Output Forecasting Total Requirements Matrix

  15. = Input-Output Forecasting Total Requirements Matrix Final Demand Vector Total Demand Vector

  16. Input-Output Forecasting Revised Input-Output Flow Table

  17. Chapter 5 Appendix

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