Page 84 - DCOM102_DMGT101_PRINCIPLES_AND_PRACTICES_OF_MANAGEMENT

Principles and Practices of Management

Notes A business forecast provides a high level strategic budget overview, assists in the
identification of business opportunities and risks, and provides a quantifiable framework
for the development of business strategies and actions.
Forecasting forces executives to look ahead, think through the future and improve their
mental faculties.

Also very important for forecasting is the concept of premising which means a proposition
supporting or helping to support a conclusion.

4.4 Keywords

Econometrics: Econometrics is derived from several disciplines, including mathematical
economics, statistics, economic statistics, and economic theory. The goal of econometrics is
twofold: to give economic theory empirical data and to empirically verify it.
Forecasting: Forecasting is the process of estimation in unknown situations.
Futurist: Futurists, are those who speculate about the future.
Premise: A proposition antecedently supposed or proved; something previously stated or assumed
as the basis of further argument.

4.5 Self Assessment

Fill in the blanks:
1. The .................. become guides for business planning.
2. .................. give way to opinions.
3. .................. premises are concerned with the general business climate.

4. When a major technological breakthrough does occur, it takes .................. and .................. to
accept the implications of the finding.
5. Historians often .................. their own beliefs and biases when they write about the past.

6. .................. forecasting technique is appropriate for all situations.
7. Decision theory is based on the concept that an .................. of a discrete variable.
8. ……………………should act as a pre-stage of budget preparation.
9. Forecasting based on intuition is referred to as……………………..forecasting.
10. …………………forecasts give more accurate figures for future.

4.6 Review Questions

1. After going through the above unit, what do think is the difference between budgeting
and forecasting in cost accounts?
2. A firm uses simple exponential smoothing with a = 0.1 to forecast demand. The forecast
for the first week of February was 500 units, whereas actual demand turned out to be 450
units.

(a) Forecast the demand for the second week of February.
(b) Assume that the actual demand during the second week of February turned out to be
505 units. Forecast the demand for the third week of February.

76 LOVELY PROFESSIONAL UNIVERSITY