Task 1

• Construct graphs based on the data below. Extrapolate the data to predict the company's sales for 2006.

Task 2

• Explain the reasoning for your prediction.
• Which of the two companies was easier to predict and why?
• What other information would be useful in helping you to comment on the validity and reliability of the prediction?
• Assume that your prediction could be inaccurate by + or - £50,000. How might you show this on your graph?

Task 3

• Plot the data in the table into a graph. (You can use the spreadsheet to facilitate this process).
• What, if any, trends does the data exhibit?
• What explanation could you offer for the trend/s you may have identified? (Hint: think about the business cycle - see the glossary for a definition of this term)

Task 4

• Calculate the 5-point moving total. To do this, add the first 5 years data and then move forward by one year adding the next 5 points and so on.

Task 5

• Calculate the 5-point moving average by dividing the 5-point moving total by 5. The result should be placed in the middle box of the series of numbers (1995 for the first series).
• If you were to use a 3-point moving average, you would do the same process but use only 3 years. The aim of this technique is to smooth out cyclical variations in data.
• What factors might determine the number of 'points' you settle on?

Task 6

• Plot the 5-point moving average data on the graph you have drawn of total sales against time.

Task 7

• Calculate the average cyclical variation for point 4 in the cycle. This is done by finding the sum of the cyclical variations (a test of your knowledge of adding positive and negative numbers!) and dividing by the number of points identified (in this case it is 2 but could be more depending on the amount of data used and the number of points, chosen i.e. whether it is 3 point, 4 point and so on).

Task 8

• Calculate the interval between the years 1995 and 2003. Subtract the moving average figure for 2003 from that of 1995 and divide by the number of intervals. This figure can be added onto the moving average to give you the likely trend for 2004 and 2005.

Task 9

• Take the result from task 5 and do a + and - calculation to the 2005 figure you have just calculated. This will produce a range within which the forecast might be reasonably being expected to sit.

Task 10

• Evaluate the reliability of the forecast you have made. Consider the factors that might influence the actual outcome and discuss what a business might do to take such factors into consideration in their planning.
  
  (Hint: think of the factors outside a firm's control - the nature of the business, the lead time in production, the type of productive process and how the business might plan to cope with shortages/surpluses. You have free reign here to base your evaluation around different types of business, using ones you are familiar with is always advisable).

Extension Work

Look at the following Web sites:

• An Overview of Forecasting Methodology - written by David S. Walonick (http://www.statpac.com/research-papers/forecasting.htm)
• Business Astrologers (http://www.businessastrologers.com/NYHANNAH.htm)
• Amanita Market Forecasting (http://www.amanita.at/e.htm)
• AstroEcon Financial Astrology and Technical Analysis (http://www.astroecon.com/lesson/less6b.html)

Offer a critical analysis of the value of using non-traditional methods of business forecasting.

The Time-Critical Decision Makingfor Business Administration site also has some useful information and goes into more detail on forecasting methods. (http://home.ubalt.edu/ntsbarsh/stat-data/Forecast.htm)