PPT on forecasting

Outline

Forecasting is an essential tool in any decision making process. There are various techniques of forecasting.

I Regression analysis is used to forecast revenues and expenses: Regression analysis is any statistical method where the mean of one or more random variables is predicted conditioned on other (measured) random variables. The Regression Analysis is the part of Statistics that analyzes the relationship between quantitative variables. It helps predict the reaction of a variable when a related variable varies.

II Decision tree analysis is attempted to enumerate various possible combinations of events that culminate in the formation of demand and the probabilities of the various events occurring.
A decision tree is a graph of decisions and their possible consequences, (including resource costs and risks) used to create a plan to reach a goal. Decision trees are constructed in order to help with making decisions. It can be used in estimation of demand. The Delphi Technique is a form of evaluation. Most often this technique is used for forecasting future events or products.

III Time series
Time series is one of the quantitative methods we use to determine patterns in data collected over time. Time series analysis is used to detect pattern of change in statistical information over regular intervals of time. We project these patterns to arrive at estimate for the future. Thus times series helps us cope with uncertainty about the future.

How regular and lasting were the past trends? What are the chances of these patterns are changing.
How accurate is the historical date that we use in time series?
It can be used in estimating seasonal demand, secular growth in demand its products

An indicator is anything that can be used to predict future financial or economic trends. Popular indicators include unemployment rates, housing starts, inflationary indexes, S&P 500 and consumer confidence. These are the leading indicators. Leading indexes are designed to turn a few quarters ahead of coincident indexes that describe current economic activity whereas the index of lagging indicators, a measure of past economic performance. There will be less growth in housing indicating less growth in economy and to the General Motors.

Housing
If expenditure is not seeing any growth as well as decline within parameters that indicates the economy is in either in depression or recession. It will reduce the demand of the Automobiles.

Unemployment
Lay off and hiring decisions comes with the lag and is based on the past performance. It does not change direction until a few quarters after the rest of the economy does.

http://www.bls.gov/news.release/empsit.nr0.htm

Conclusion
According to the above indicators there can be good growth for the company GM in future. There can be real growth of say
5% ( as per GDP: 1% premium to Gdp) and inflation of 3%. Thus total there can be 8% growth in Sales of GM in coming year.

MACROECONOMICS BY MISHRA AND PURI
http://www.bea.doc.gov/bea/newsrelarchive/2005/gdp305f_fax.

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