The CEO noticed that he has five years of quarterly sales data in hand, and they form a time series. He decided to also ask you to perform time-series analysis on it, and use it to forecast what future sales are expected to be at the end of 1Q 2009.
1. Plot the quarterly sales as a function of time in your Excel data spreadsheet. From the shape of these graphs, and any analysis that you think is needed, determine what type of trend model is best suitable for this data. Write down the equation for the trend model, and define and explain each of the variables as it applies to this problem.
2. Do a regression analysis on the data for the trend model you decided on in Question 1, and determine the parameters for the model.
3. Answer the CEOââ?¬â?¢s question. Tell him how much sales are expected to be at the end of 1Q 2009. Be careful, and also include the 95% confidence interval for this number.
Step by step method for regression analysis and time series are discussed here. Regression coefficients, coefficient of determination, scatter diagram and significance of regression model are explained in the solution.