Financial Forecasting and Decision Making

Chapter 10FORECASTING SALES

LEARNING OBJECTIVES

The purpose of this chapter is to discuss some of the techniques that are available to forecast sales. As we have seen, the projected sales figure is an important input into the model. After completing this chapter, you should be able to do the following:

•     Identify compound growth techniques to verify sales growth estimates given to you.

•     Recognize how regression analysis can be used to assist in developing a sales forecast.

Forecasting Sales: Sales Goal

1.     Management presents a sales goal that is consistent with overall corporate objectives.

2.     To ensure company acceptance of the goal, management must provide a reward structure consistent with achieving the goal.

3.     The sales goal must be realistic, or it will be counterproductive.

KNOWLEDGE CHECK

1.     Select the best statement from those listed:

a.     Sales goals can be generated at upper levels of management, but this process can be counterproductive.

b.     Having upper management dictate the company's sales goals generally provides the company with attainable goals with which most employees will agree.

c.     Both statements are true.

d.     Neither statement is true.

This top-down approach to sales forecasting is often counterproductive. Instead of deciding a realistic sales forecast, this approach is more often a goal. To use this approach ...