Finance Cas Study - 664 Words

Lesson 7 case study extra credit 1. If Stephenson wishes to maximize its total market value, would you recommend that it issue debt or equity to finance the land purchase? Explain. If Stephenson wants to maximize its total market value it should use debt to finance the $100 million dollar purchase. By using the debt to finance it will decrease the overall taxable income the company reports. Since interest payments are tax deductible it will create a tax break for the company which will increase the overall total value of Stephenson Real Estate. 2. Construct Stephenson’s market value balance sheet before it announces the purchase. Stephenson has 15 million shares of common stock at $32.50 per share. The market value of the†¦show more content†¦100,000,000/33.83 = 2,955,956 c. Construct Stephenson’s market value balance sheet after the equity issue, but before the purchase has been made. How many shares of common stock does Stephenson have outstanding? What is the price per share of the firm’s stock? Balance sheet after equity issue Old Assets $487,500,000 Debt 0 Cash 100,000,000 Equity $607,500,000 NPV 20,000,000________________________________________________ Total assets $607,500,000 Total debt and equity $607,500,000 Shares outstanding = 15,000,000 + 2,955,956 = 17,955,956 shares outstanding Stock price per share = 607,500,000/17,955,956 = $33.83 it remains the same. d. Construct Stephenson’s market value balance sheet after the purchase has been made. PV= 15,000,000/0.125 = $120,000,000 Balance sheet after purchase Old Assets $487,500,000 Debt 0 PV 120,000,000 Equity $607,500,000 Total assets $607,500,000 Total debt and equity $607,500,000 4. Suppose Stephenson decides to issueShow MoreRelatedMgec61 Note - Chapter 13 Essay1022 Words   |  5 PagesMGEC61 – International Economics: Finance Introduction ï‚ · International finance is a study of problems and policies of an open economy. ï‚ · International finance studies the issues like unemployment, savings, trade imbalances, money and price levels (include exchange rates). Organization of the course 1) Introduction – chapter 13 2) Interest rate parity (how exchange rate is determined by the flows of capital) and exchange rate overshooting – chapters 14 15 3) Purchasing power parity and theRead MoreA Complex Adaptive System ( Cas )1198 Words   |  5 Pagescharacterized by a Complex Adaptive System (CAS). 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Amazing Destinations Ltd. Is An Independently Run Travel...

Amazing Destinations Ltd. is an independently run Travel Agency that specializes in adventure holidays. The company has been in operation for 12 years organizing tours and independent holidays to destinations such as Greenland, Alaska, Burma, Borneo and Namibia; and targets the luxury end of the travel market. The company is in the midst of revaluating their business structure and is considering adding real adventure holiday package in the remote regions of the world. The company has realised declining revenues due to recession and is looking for opportunities to explore new markets. The problems currently impacting this company are, declining revenues, focus on luxury holidays package geared towards age group of 40-60, lack of digital marketing techniques, dated information system, and staff that is not receptive of technological changes. Amazing Destinations can turnaround their business operations by attracting new customers to offset declining sales and add new tourism packages to expand their product offerings. Real adventure holiday package is the right step to attract younger generation into the company’s brand offering and with exceptional service and customized experience, the company could convert the real adventure customers to their more profitable luxury holidays package and in the process develop brand loyalty. The company in order to stay competitive in the marketplace must also implement a new online booking system to increase operations efficiency andShow MoreRelatedAir Asia Marketing Plan17846 Words   |  72 PagesSince 2001, AirAsia has swiftly broken travel norms around the globe and has risen to become the world’s best. 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Leading Organisation Change

Question: Discuss about theLeading Organisation Change. Answer: Introduction Identification of issues and problems in Wong Manufacturing Company (WMC) based on information supplied. Considerations are to be made from the perception of an external change consultant engaged to assist the board address the issues and challenges. The four assumptions that can be added to the issues and problems being faced by the Wong Manufacturing company are succession planning to the third generation; an in-depth research report into the new markets suggested by Mira and Ryan to generate awareness among the board members regarding entry into newer markets as well as customer perception in existing markets; awareness of new technology in manufacturing that would further help reduce the cost of production; lack of training in CRM among the staff which would help keep a track of the expected large scale operations. Larry Greiner (1997) suggests that the growth of all organisations can be classified into five distinct phases. Each phase is characterised by a period of calm and culminates in a management crisis. Furthermore, each phase of growth shows the influence of the previous phase. Greiner, therefore, argues that organisations that are aware of the previous stages of growth can be proactive in managing the next stage. He believes that the management can be influential in anticipating the impending crisis and therefore preparing themselves for the same. Grenier comes to the conclusion that proactive companies can utilise expected organisational crisis by converting them into stepping stones for capitalising on opportunities of future growth. In this article, Grenier has provided a suitable solution to manage the crisis in each phase of organisational growth. Malhotra and Hinings (2015) however speak different language in their studies on continuity and change as a process of organisational transformation. They are of the opinion that organisational transformation occurs as a result of continuous change rather than disruptive change. They argue that while resistance to change is always constant, if the factors resisting and promoting change are equal, then the energy that is generated as a result of the tug of war would aid in the completion of the transformation. Furthermore, they observed that the same energy that aids in the change transformation can be channelled to create awareness among all parties to the debate. Malhotra and Hinings (2015) were of the opinion that this would help create an environment of mutual discussion and help resolve the conflict from the grass root levels. They therefore believe that a suppression of this energy would precipitate the crisis by magnifying possible issues involved. Finally, they observed that the discussion and debate as a result of the mutual exploration into the crisis would help mould the continuity and prepare the organisation for change. This initiative would be possible due to the synthesizing pattern that would aid the unanimous transition of change rather than a splintered approach that would result from a polarised ideology among all concerned persons. They further suggested that any weakness in any of these phases would only aggravate the crisis rather than simulate continuity and change. A comparison between the two approaches, show that while the underlying question remains the same, both articles have adopted distinct and different methods to resolve the issue (Malhotra Hinings, 2015), (Greiner, 1997). While Greiner speaks of change happening in five phrases, Malhotra and Hinings speak of continuity and reciprocal relationship it enjoys with change. While both are of the opinion that change is needed for the growth of organisations, Greiner speaks of a futuristic approach of utilising change for organisational growth; Malhotra and Hinings look at ensuring a smooth transition or continuity in the organisation by channelling the energies that are created as a result of the tussle between resistance to change and need for change. Gersick (1991) speaks of the influence of change on the development of organisational systems. The study into the revolutionary changes to multiple levels looks into traditional assumptions as wells new theories at each level of analysis. He conceptualises change as a punctuated equilibrium. In other words, he assumes that alterations are separated by long period s of stability. Furthermore, he argues that stability does not impact incremental adaptability of the organisation while it is effective in controlling and limiting any disruptive or sudden change. He continues on the same thinking put forth by Malhotra and Hinings when he speaks of continuity in the organisation (Malhotra Hinings, 2015), (Gersick, 1991). He also supports the findings of Greiner, when he states that organisations enjoy long period of stability or calm with upheavals or crisis between each period. (Greiner, 1997), (Gersick, 1991). The entire study focuses on disruptive change in organisations and the manner in which systems react to such changes as well as their ability to function despite the changes that are occurring. The article raises several questions about the impact of revolutionary changes on organisational growth and continuity within the company despite the changes that are happening. A quick look at the events occurring at Wong Manufacturing Company also supports the findings by Gersick. Three generations have been shown at the helm in WMC. While the founder, Sofea Wong is shown as a woman of substance who created the company from scratch, she is also picturised as a fair leader, who is willing to share the profits with her employees. This character is clearly visible in the wages that she offers ( clearly above the minimum wages in the country); as well as employee benefits like child minders, that help her employees focus on the work on hand rather than worrying about matters close to their heart like the welfare of their children during the hours that are spent at work. The second generation is shown as a bridge between the larger than life Sofea Wong and the employees. While Hana is efficient, she is highly dependent on Sofea whom she consults before making any major decision. This thinking and working style earns Hana the respect of her employees who are happy that there is not disruptive change despite a change in guard within the top management at WMC. The change in management has been smooth and the transition has not created any major change in the company other than a slight decrease in the number of employees. His change has been attributed I the reduction in profit margins due to shrinking markets. The third generation, consisting of Mira and Ryan, on the other hand, are not ready to sit back and watch the company build by their grandmother bite the dust. They realise that dramatic change is essential for the company to survive in the long run. Due to their education, both of them look at meeting the challenge in two different ways. They are of the opinion that a two pronged approach would be highly beneficial for the company in the changed economic circumstances. Unfortunately, they are unable to convince the board, who believe that the siblings have bitten off more than they can chew. The board is of the opinion that the change of guard must be slow and similar to the transition between Sofea and Hana. Narratives and story-telling help foster a sense of belonging to all who believe themselves to be part of the story, or are remotely associated with it (Dailey Browning, 2013). This concept is similar to the sense of ownership felt by call children who love listening to stories from their grandmother. At a later stage, even if the same story is told by any other individual, the child continues to associate the story with his or her grandmother. On similar lines, each organisation or company would have stories associated with it. These stories add a dimension to the company and create an atmosphere of reverence and awe mong the listeners. Repetitive listening also creates an image that is constantly re-enforced with each re- telling. Thus, on analysing Dailey and Brownings article on repetitive narration with the events occurring in Wong Manufacturing Company, it is evident that many of the findings and conclusions hold true. Sofeas larger than life image is a classic example of the power of narrative repetition. The larger than life image also ensures that she can do nothing wrong in the eyes of her employees who hold her high up on a pedestal. While Hana was able to successfully use the ideology during her transition to the top management by ensuring that all employees knew that Sofea was involved in the decision making process. Unfortunately, narrative repletion failed to work its magic during the transition to the third generation. By this time the larger than life image of Sofea and the humble image of Hana were well established the minds of the employees, who now felt that Mira and Ryan were young children who did not know what they were doing. The employees as well as the Board were of the opinion that the siblings were merely trying to prove their superiority in light of the transition of power. Mira and Ryan are the change managers, if change were to occur at WMC. They need to consider two aspects of successful change management. Eh first is in the implementation of change and the second is concerned with the continuous monitoring and review of change to ensure that it is on the correct track. The change agents need to manage the speed and complexity of the change in an effective and efficient manner (Hayes, 2014) so as to neutralise the threats that may arise as a result of any possible opposition to change. The effectiveness of collaborative intervention is directly increased when they enjoy the respect of the persons with whom they are working (Hayes, 2014). The two modes that would be apt for use at WMC are listening to the viewpoints of employees and Board members. Both Ryan and Mira should adopt this method rather than riding roughshod over them in a bid to put forth own views regarding the impeding change in the company. The second method would involve suspending all critical judgement and keeping an open mind to the changes as well as the opinion of the Board, employees, and other concerned parties. This initiative would help the aggrieved parties like employees and the board, as well as clients to explore the possibilities and options before them. This would also allow them a free hand in understanding the reasons for the initiatives by the change agents (Hayes, 2014). While these methods of collaborative intervention do not usually go hand in hand, the change agents need to ensu re that there is no deviation from this process, in order to ensure that the transition is smooth and does not happen under the shadow of conflict and upheaval within the company. Organisational change follows a typical typology classification that holds true regardless of the country or industry that is being referred to. The typology may be broadly classified into traditional and modern. While the classical theories were concerned with hierarchy and were more rigid, the modern theories tend to consider the basic human psychology and changes in technology which would affect the manner in which the company functions. Based on this perception, WMC which has followed a traditional approach till date would be better positioned if it were to adopt a shift in its ideology when considering implementation of change. Since the change agents need to ensure that change is smooth and stress free, they need to focus on four important questions, viz., What, How, Who and When. It is observed that the issues being faced by WMC is primarily due to the lack of commutation between the change managers and the organisation members. Dialogue is the best option to overcome this situation. As can be observed, from the happenings at WMC, the organisation members are agitated and have a negative opinion about the initiatives by the siblings. Change agents at WMC can help cool the situation by adopting a collaborative and more passive approach to change management. The agents need to communicate the various proposed changes as well as the reasoning behind the proposals. However, the change agents must ensure that they leave the interpretation of the changes and the reasons change with the organisation members. The change agents must be prepared for not only opposition to the changes (resistance to change) but also to the fact that interpretation and the subsequent perception may be against the ideology of Mira and Ryan. The change agents must be prepared to implement the changes slowly and in a phased manner to minimise the opposition to change as much as possible. References Dailey, S. L., Browning, L. (2013). Retelling Stories in Organizations: Understanding the Functions of Narrative Repetition. Review, 22-43. Gersick, C. J. (1991). Revolutionary Change Theories: A Multilevel Exploration of the Punctuated Equilibrium Paradigm. Academy of Management Review, 10-86. Greiner, L. E. (1997). Evolution and Revolution as Organizations Grow: A company's past has clues for management that are critical to future success. Family Business Review, 397-409. Hayes, J. (2014). The Theory and Practice of Change Management. Hampshire: Palgrave Macmillan. Malhotra, N., Hinings, C. (2015). Unpacking Continuity and Change as a Process of Organizational Transformation. Long Range Planning, 1-22.

Sales Forecasting free essay sample

Usage can differ between areas of application: for example, in hydrology, the terms forecast and forecasting are sometimes reserved for estimates of values at certain specific future times, while the term prediction is used for more general estimates, such as the number of times floods will occur over a long period. Risk and uncertainty are central to forecasting and prediction; it is generally considered good practice to indicate the degree of uncertainty attaching to forecasts. In any case, the data must be up to date in order for the forecast to be as accurate as possible. Although quantitative analysis can be very precise, it is not always appropriate. Some experts in the field of forecasting have advised against the use of mean square error to compare forecasting methods. Forecasting involves the use of information at hand to make statements about the likely course of future events. In technical terms, conditional on what one knows, what can one say about the future? Forecasting techniques include uni-variant, multi-variant, and qualitative analysis. We will write a custom essay sample on Sales Forecasting or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Time series used to forecast future trends include exponential smoothing, ARIMA (Autoregressive Integrated Moving Average) and trend analysis. Multi-variant prediction methods include multi regression model, econometrics, and state space. Delphi marketing research, situational analysis, and historical analogue belong to qualitative methodologies. These forecasting methods forecast trends over different time horizons. There are significant differences in time length being considered when using these forecasting methods. Basically, uni variant methods in short-term forecasting usually generate higher accuracy than those of multi variants (Box et al. , 1994). LITERATURE REVIEW Forecasting techniques can be categorized in two broad categories: quantitative and qualitative. The techniques in the quantitative category include mathematical models such as moving average, straight-line projection, exponential smoothing, regression, trend-line analysis, simulation, life-cycle analysis, decomposition, Box-Jenkins, expert systems, and neural network. The techniques in the qualitative category include subjective or intuitive models such as jury or executive opinion, sales force composite, and customer expectations (Kress, 1985; Mentzer Kahn, 1995). Along with qualitative and quantitative, forecasting models can be categorized as time-series, causal, and judgmental. A time-series model uses past data as the basis for estimating future results. The models that fall into this category include decomposition, moving average, exponential smoothing, and Box-Jenkins. The premise of a causal model is that a particular outcome is directly influenced by some other predictable factor. These techniques include regression models. Judgmental techniques are often called subjective because they rely on intuition, opinions, and probability to derive the forecast. These techniques include expert opinion, Delphi, sales force composite, customer expectations (customer surveys), and simulation (Kress, 1985; Wilson Keating, 1994). Typically, the two forms of forecasting error measures used to judge forecasting performance are mean absolute deviation (MAD) and mean absolute percentage error (MAPE). For both MAD and MAPE, a lower absolute value is preferred to a higher absolute value. MAD is the difference between the actual sales and the forecast sales, absolute values are calculated over a period of time, and the mean is derived from these absolute differences. MAPE is used with large amounts of data, and forecasters may prefer to measure error in percentage (Wilson Keating, 1994). The forecasting process It is important to know when we should use qualitative or quantitative forecasting techniques. Managers apply quantitative forecasting techniques when environment is predictable and if they have data from past period about sales. These techniques are good when we want to predict existing products and technologies. They often used mathematics’ techniques for forecasting. Qualitative forecasting techniques are used in the not predictable environment and when we don’t have enough data. These techniques are usually used when managers forecast launching the new product line or new technologies. QUALITATIVE FORECASTING TECHNIQUES Qualitative forecasting techniques are sometimes referred to as judgmental of subjective techniques because they rely more upon opinion and less upon mathematics in their formulations. The absence of past sales means that you have to be more creative in coming up with prediction in the future. Sales forecast for new products are often based on executive judgments, sales force projection, surveys and user’s expectation. We summarized qualitative forecasting techniques which include: Jury of executive opinion consists of combining top executives’ views concerning future sales. This type of forecasting technique is term a ‘top down’ technique whereby a forecast is produced for the industry. Customer expectations use customer’s expectations of their needs and requirements as the basis for the forecast. The data are typically gathered by a survey of customers or by the sales force Sales force composite combines the individual forecasts of salespeople. This technique involves salesperson making a product-by-product forecast for their particular sales territory. Such a method is a bottom-up approach. Delphi method is a similar to jury of executive opinion technique. The main difference the members do not meet in committee. A project leader administers a questionnaire to each member of the team which asks questions usually of a behavioural nature. The questioning then proceeds to a more detailed second stage which asks questions about the individual company. The process go on to further stages where appropriate. The ultimate objective is to translate opinion into some form of forecast. Bayesian decision theory has been placed under techniques although it is really a mixture of subjective and objectives techniques. This technique is similar to critical path analysis in that it uses a network diagram and probability must be estimated for each event over the network. We already mention that qualitative techniques are often used when managers have little data to incorporate into forecast. New products are a classic example of limited information and qualitative techniques are frequently employed to predict sales revenues for these items. Qualitative techniques are recommended for those situations where managers or sales force are particularly adept at predicting sales revenues. These techniques are often utilized when markets have been disturbed by strikes, wars, natural disasters, recessions or inflation. Under these conditions historical data are useless and judgmental procedures that account for the factors causing market stocks are usually more accurate. Regression Analysis: statically relates sales to one or more explanatory (independent) variables. Explanatory variables may be marketing decisions (price changes, for instance), competitive information, economic data, or any other variable related to sales. †¢ Exponential smoothing makes an exponentially smoothed weighted average of past sales, trends, and seasonality to derive a forecast. †¢ Moving aver age takes an average of a specified number of past observations to make a forecast. As new observations become available, they are used in the forecast and the oldest observations are dropped. Box-Jenkins uses the auto correlative structure of sales data to develop an autoregressive moving average forecast from past sales and forecast errors. †¢ Trend line analysis fits a line to the sales data by minimizing the squared error between the line and actual past sales values. This line is then projected into the future as the forecast. †¢ Decomposition breaks the sales data into seasonal, cyclical, trend and noise components and projects each into the future. †¢ Straight-line projection is a visual extrapolation of the past data, which is projected into the future as the forecast. Life-cycle analysis bases the forecast upon whether the product is judged to be in the introduction, growth, maturity, or decline stage of the life cycle. †¢ Simulation uses the computer to model the forces, which affect sales: customers, marketing plans, competitors, flow of goods, etc. The simulation model is a mathematical replication of the actual corporation. †¢ Expert systems use the knowledge of one or more forecasting experts to develop decision rules to arrive at a forecast. †¢ Neural networks look for patterns in previous history of sales and explanatory data to uncover relationships. These relationships are used to produce the forecast. QUANTITATIVE TECHNIQUES Quantitative techniques are sometimes termed objective or mathematical techniques as they rely more upon mathematics as less upon judgment in their computation. These techniques are now very popular as a result of sophisticated computer packages. There are many quantitative techniques: Regression analysis statistically relates sales to one or more explanatory (independent) variables. Explanatory variables may be marketing decisions (price changes, for instance), competitive information, economic data on any other variable that can be related to sales. Exponential smoothing makes an exponentially smoothed weighted average of past sales, trend and seasonality to derive the forecast Moving average takes an average of a specified number of past observations to make a forecast. As new observations become available, they are used in the forecast and the oldest observations are dropped. Box-Jenkins uses the auto correlative structure of sales data to develop autoregressive moving average forecast from past sales and forecast errors Trend line Analysis fits a line to sales data by minimizing the squared error between the line and actual past sales values. The line is that projected into the future as the forecast. Decomposition breaks the sales data into seasonal, cyclical, trend and noise components and projects each into the forecast Straight-line projection is a visual extrapolation of the past data which is projected into the future as the forecast Life cycle analysis bases the forecast upon whether the product is judged to be in the introduction, growth, maturity or decline stage of its life cycle Simulation uses computer to model the forces which affect sales: customers, marketing plans, competitors, flow-of-goods, etc. The simulation model is mathematical replication of the actual corporation. Experts systems use the knowledge of one or more forecasting experts to develop decision rules to arrive at a forecast Neutral networks look for patterns in previous history of sales and explanatory data to uncover relationships. These relationships are then used to produce the forecast. †¢ Jury of executive opinion consists of combining top executives’ views concerning future sales. †¢ Sales force composite combines the individual forecasts of salespeople. †¢ Customer expectations (customer surveys) use customers expectations as the basis for the forecast. The data are typically gathered by a customer survey by the sales force. †¢ Delphi model is similar to jury of executive opinion in taking advantage of the wisdom of experts. However, it has the additional advantage of anonymity among participants. †¢ Naive model assumes that the next period will be identical to the present. The forecast is based on the most recent observation of data. Three planning horizons for forecasting exist. The short-term forecast usually covers a period of less than three months. The medium-term forecast usually covers a period of three months to two years. And, the long-term forecast usually covers a period of more than two years. Generally, the short-term forecast is used for the daily operation and plans of a company. The long-term forecast is used more for strategic planning (Kress, 1985; DeLurgio Bhame, 1991). Finally, the distinction between the forecasting method and forecasting system is important. A forecasting method is a mathematical or subjective technique that forecasts some future value or event. While many statistical forecasting software packages are implementations of forecasting methods, they are not forecasting systems. A forecasting system is a computer-based system that collects and processes demand data for thousands of items, develops forecasts using forecasting methods, has an interactive managementuser interface, maintains a database of demands, and has report file-writing capabilities. A forecasting system is much more complex than a forecasting method. The method is a part of the system (DeLurgio Bhame, 1991). Time Series Data Time Series Data is usually plotted on a graph to determine the various characteristics or components of the time series data. There are 4 Major Components: Trend, Cyclical, Seasonal, and Irregular Components Components of a Time Series The trend component accounts for the gradual shifting of the time series over a long period of time. Any regular pattern of sequences of values above and below the trend line is attributable to the cyclical component of the series. The seasonal component of the series accounts for regular patterns of variability within certain time periods, such as over a year. The irregular component of the series is caused by short-term, unanticipated and non-recurring factors that affect the values of the time series. One cannot attempt to predict its impact on the time series in advance. Moving Average Method The moving average method consists of computing an average of the most recent n data values for the series and using this average for forecasting the value of the time series for There are usu ¬ally five basic steps in any fore ¬cast ¬ing task. Step 1: Prob ¬lem definition. Often this is most dif ¬fi ¬cult part of fore ¬cast ¬ing. Defin ¬ing the prob ¬lem care ¬fully requires an under ¬stand ¬ing of how the fore ¬casts will be used, who requires the fore ¬casts, and how the fore ¬cast ¬ing func ¬tion fits within the orga ¬ni ¬za ¬tion requir ¬ing the fore ¬casts. A fore ¬caster needs to spend time talk ¬ing to every ¬one who will be involved in col ¬lect ¬ing data, main ¬tain-ing data ¬bases, and using the fore ¬casts for future planning. Step 2: Gath ¬er ¬ing information. There are always at least two kinds of infor ¬ma ¬tion required: (a) sta ¬tis ¬ti ¬cal data, and (b) the accu ¬mu ¬lated exper ¬tise of the peo ¬ple who col ¬lect the data and use the fore ¬casts. Often, a dif ¬fi ¬culty will be obtain ¬ing enough his ¬tor ¬i ¬cal data to be able to fit a good sta ¬tis ¬ti ¬cal model. How ¬ever, occa ¬sion ¬ally, very old data will not be so use ¬ful due to changes in the sys ¬tem being forecast. Step 3: Pre ¬lim ¬i ¬nary (exploratory) analysis. Always start by graph ¬ing the data. Are there con ¬sis ¬tent pat ¬terns? Is there a sig ¬nif ¬i ¬cant trend? Is sea ¬son ¬al ¬ity impor ¬tant? Is there evi ¬dence of the pres ¬ence of busi ¬ness cycles? Are there any out ¬liers in the data that need to be explained by those with expert knowl ¬edge? How strong are the rela ¬tion ¬ships among the vari ¬ables avail ¬able for analy ¬sis? Var ¬i ¬ous tools have been devel ¬oped to help with this analy ¬sis. Step 4: Choos ¬ing and fit ¬ting models. Which model to use depends on the avail ¬abil ¬ity of his ¬tor ¬i ¬cal data, the strength of rela ¬tion-ships between the fore ¬cast vari ¬able and any explana ¬tory vari ¬ables, and the way the fore-casts are to be used. It is com ¬mon to com ¬pare two or three poten ¬tial mod ¬els. Each model is itself an arti ¬fi ¬cial con ¬struct. It is based on a set of assump ¬tions (explicit and implicit) and usu ¬ally involves one or more para ¬me ¬ters which must be â€Å"fit ¬ted† using the known his-tor ¬i ¬cal data. A com ¬mon area of fore ¬cast ¬ing that deserves spe ¬cial atten ¬tion is demand fore-cast ¬ing for supply-chain man ¬age ¬ment. Step 5: Using and eval ¬u ¬at ¬ing a fore ¬cast ¬ing model. Once a model has been selected and its para ¬me ¬ters esti ¬mated, the model is used to make fore ¬casts. The per ¬for ¬mance of the model can only be prop ¬erly eval ¬u ¬ated after the data for the fore ¬cast period have become avail ¬able. A num ¬ber of meth ¬ods have been devel ¬oped to help in assess ¬ing the accu ¬racy of fore ¬casts. There are also orga ¬ni ¬za ¬tional issues in using and act ¬ing on the fore ¬casts. . CONCLUSION The forecasting process refers to a series of procedures used to forecast. It begins when an objective is determined. For example sales objectives can be (estimation of dollar sales, number of sales people to hire, etc. ). Next step is determination of dependent refer to what is being forecasting: sales or the number of sales people to hire next year) and independent variables. After this step we should determine forecast procedure and methods for analyzing data. Data are then gathered and analyzed often assumptions must be made about the forecast. The forecast is made, finalized, and, estimate passes, evaluated One of the keys to success in sales knows where are customers are located and being able to predict how much they will buy. Sales forecasting is so important that more then 50% of companies include this topic in their sales manager training programs. Inaccurate demand predictions can have disastrous effects of profitability. Managers should calculate and record the forecasting errors produced by the qualitative techniques they employ so that will know when these methods are best employed. Qualitative techniques are often used in conjunction with the quantitative techniques. Managers identified several sources to learn about sales forecasting techniques. The majority of them identified colleagues as an important source.