Mastering Financial Modelling in Microsoft Excel 3rd edn, 3rd Edition

8

Forecasting models

Introduction

Historic forecasts

Trend lines

Trend lines for analysis

Data smoothing

Cyclicality and seasonality

Summary

INTRODUCTION

Management is concerned with predicting and managing the future company performance in order to produce positive returns for shareholders, whether in strategic planning or annual budgeting. The level of risk or uncertainty is not known in advance; however, a forecast is an attempt to describe, analyse and incorporate all the factors that may affect the final outcome. In Excel, you often want to forecast sales or cost figures and this chapter discusses some useful methods of forecasting.

Examples of forecasting models include:

• production planning and materials scheduling;
• demand forecasting; ...