Describe the various forecasting methods. What are the steps needed to develop a forecast? Explain how...

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Accounting

Describe the various forecasting methods. What are the stepsneeded to develop a forecast? Explain how you could use Excel tohelp develop a forecast. Provide an example of an Excel forecastfor a three year period on any one income statement or balancesheet account.

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Forecasting is the process of making predictions of the futurebased on past and present data and most commonly by analysis oftrendsVarious of forecasting methods are1Qualitative methodQualitative forecasting techniques aresubjective based on the opinion and judgment of consumers andexperts they are appropriate when past data are not availableThey are usually applied to intermediate or longrange decisionsExamples of qualitative forecasting methods are informed opinionand judgment the Delphi method market research and historicallifecycle analogy2Quantitative methodQuantitative forecasting models are usedto forecast future data as a function of past data They areappropriate to use when past numerical data is available and whenit is reasonable to assume that some of the patterns in the dataare expected to continue into the future These methods are usuallyapplied to short or intermediaterange decisions Examples ofquantitative forecasting methods are last period demand simple andweighted NPeriod moving averages simple exponential smoothingpoisson process model based forecasting and multiplicative seasonalindexes Previous research shows that different methods may lead todifferent level of forecasting accuracy For example GMDH neuralnetwork was found to have better forecasting performance than theclassical forecasting algorithms such as Single Exponential SmoothDouble Exponential Smooth ARIMA and backpropagation neuralnetwork3Average approachIn this approach the predictions of allfuture values are equal to the mean of the past data This approachcan be used with any sort of data where past data See Answer

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