From the course: Financial Modeling and Forecasting Financial Statements
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Incorporate seasonal patterns and recent developments
From the course: Financial Modeling and Forecasting Financial Statements
Incorporate seasonal patterns and recent developments
- Let's do some more practice with simple sales forecasting. In this example, we'll see the importance of two additional factors. First, seasonal patterns in sales. Second, the importance of not letting historical data overrule the most current information available. Consider the following quarterly sales data for Rush Valley Company for two thousand X one and two thousand X two. Now the first thing you'll notice is that there's definitely a seasonal pattern in Rush Valley's quarterly sales data. If you look at two thousand X one you can see that the fourth quarter sales are as much as the first three quarters put together. Eight hundred plus six hundred and forty plus one thousand two hundred is is the total fourth quarter sales of two thousand six hundred and forty. In other words, half of the total sales for the year occurred in the fourth quarter. This type of seasonal pattern is typical, especially among retail…
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