Question

What does forecasting involve and what does it enable? (In Australian Accounting Environment) Discuss in 100 to 120 words

Answer 1

Forecasting involves using and analyzing historical data to make informed decision making regarding future. Companies try to predict the future trend using forecasting. Business decisions such as budgeting/allocation of budgets are made by forecasting the anticipated expenses over a period of time.

There are various methods for forecasting - Qualitative and Quantitative. The methods mostly involve predicting a variable by projecting associated variables. Forecasting enables making better business decisions such as:

• Better planning of production with respect to demand
• Analyze the impact of various factors on a variable such as sales
• Predict success/failure of a product
• Number of people to hire
• Planning budgets and estimate expenses