3.3.1 - Quantative Sales Forecasting

Question 1

Why is sales forecasting needed

Answer 1

• HR plan
• cash flow forecast
• profit forecasts and budget
• production planning

Question 2

3 quantitative sales forecasting techniques

Answer 2

• moving averages
• extrapolation
• correlation

Question 3

Def moving average

Answer 3

Is a quantitative method used to identify underlying trends in a raw set of data

Question 4

Sales forecasting def

Answer 4

This is the process of estimating the future sales of a business

Question 5

Extrapolation

Answer 5

Means predicting by project past trends into the future

Question 6

Def time series data

Answer 6

A series of figures covering an extended period of time

Question 7

Process of moving averages

Answer 7

Adding several months, calculating average for these months

Question 8

When is quantitative sales forecasting difficult

Answer 8

Dynamic markets, start up businesses and income and price elastic demand

Question 9

Factors affecting sales forecasting

Answer 9

Consumer trends, economic variables, actions of competitors

Question 10

Advantages of moving averages

Answer 10

Useful when dealing with seasonal data

Minimises extreme values

Question 11

Advantages of extrapolation

Answer 11

Quick and easy to implement
Mostly accurate
Can preparer for particular time of year

Question 12

Disadvantages of extrapolation

Answer 12

Doesn’t account for external factors
Not useful in some markets
Not statistically valid

Question 13

Advantages of correlation

Answer 13

Predicts sales and demand

Question 14

Disadvantages of correlation

Answer 14

Can’t predict uncertainty in sales

Changing markets

Question 15

Def sales forecasting

Answer 15

This is the process of estimating the future sales of the business

Question 16

Purpose of sales forecasting

Answer 16

Decide to increase productive capacity and employ more workers, allows businesses to work out cash flow forecasts, helps guide when a business should start promotional activity

Question 17

Def direct relationship

Answer 17

Happens as one variable increases, so does the other

Question 18

Def inverse relationship

Answer 18

Happens as one variable increases, the other decreases

Question 19

3 general limitations of quantitative sales forecasting techniques

Answer 19

• future may not look like the past eg changes in external factors
• quality of forecast reliant on ability of forecaster to interpret the data being used to generate forecast
• time consuming/ complex to make