Forecasting

RISK

• can be measured

• cannot be measured

UNCERTAINTY

• Controllable

• Uncontrollable

forecasting is aimed at

• reducing risk in decision making

• influencing the behavior of organizational resources to implement organizational strategies

• maintaining or altering patterns in organizational activities

Forecasts are needed for money and credit conditions so that

• returns or cash inflows accruing from the investment may be estimated

• Workers will be hired, trained in efficient manner

• the cash needs of the firm may be met at the lowest possible cost.

Forecasts are needed for future economic activities so that

• plan changes will reflect the company's capital structure

• decisions may support the acquisition of new capital

• returns or cash inflows accruing from the investment may be estimated

Forecasts are needed for interest rates

• to plan changes in the company's capital structure

• to help in planning working capital needs

• to support the acquisition of new capital

Forecasts are needed for the collection of accounts receivable

• to support the acquisition of new capital

• so that workers will be hired, trained in efficient manner

• to help in planning working capital needs

Long-term forecasts are needed

• to estimate the cash needs of the firm

• to train workers

• to plan changes in the company's capital structure

In Qualitative methods

• Forecasts generated subjectively by the forecaster

• Forecasts generated through mathematical modeling

Quantitative methods

• is objective

• is subjective