Meaning:
Forecasts are becoming the lifetime of business in a world, where the tidal waves of change are sweeping the most established of structures, inherited by human society. Commerce just happens to the one of the first casualties. Survival in this age of economic predators, requires the tact, talent and technique of predicting the future.
Forecast is becoming the sign of survival and the language of business. All requirements of the business sector need the technique of accurate and practical reading into the future. Forecasts are, therefore, very essential requirement for the survival of business. Management requires forecasting information when making a wide range of decisions.
The sales forecast is particularly important as it is the foundation upon which all company plans are built in terms of markets and revenue. Management would be a simple matter if business was not in a continual state of change, the pace of which has quickened in recent years.
It is becoming increasingly important and necessary for business to predict their future prospects in terms of sales, cost and profits. The value of future sales is crucial as it affects costs profits, so the prediction of future sales is the logical starting point of all business planning.
A forecast is a prediction or estimation of future situation. It is an objective assessment of future course of action. Since future is uncertain, no forecast can be percent correct. Forecasts can be both physical as well as financial in nature. The more realistic the forecasts, the more effective decisions can be taken for tomorrow.
In the words of Cundiff and Still, “Demand forecasting is an estimate of sales during a specified future period which is tied to a proposed marketing plan and which assumes a particular set of uncontrollable and competitive forces”. Therefore, demand forecasting is a projection of firm’s expected level of sales based on a chosen marketing plan and environment.
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