Critical Thinking Exercise 1. It has been said that forecasting using a time ser
ID: 412270 • Letter: C
Question
Critical Thinking Exercise 1. It has been said that forecasting using a time series exponential smoothing is like driving a car by looking in the rearview mirror. What are the conditions that would have to exist for driving a car that are analogous to the assumptions made when using exponential smoothing? LOS 2. When a new business is started, or a patent idea needs funding, venture capitalists or investment bankers will want to see a business plan that includes forecast information related to a profit and loss statement. What type of forecasting information do you suppose would be required?Explanation / Answer
It has been said that forecasting using exponential smoothing is like driving a car by looking in the rear-view mirror. What are the conditions that would have to exist for driving a car that is analogous to the assumptions made when using exponential smoothing?
Answer:- When a person drives a car, he knows where he has to look. In most of the time, he has to look straight ahead while keeping the eyes on side glasses from time to time. Along with this, it is also recommended to have an occasional glance into the rearview mirror.
In case of any quantitative forecasting method, we use historical data for the forecasting purposes. Exponential smoothing is a method used in the forecasting for eliminating the effect of any random deviation in the data trends. Along with this, similar to any other forecasting method, we have an assumption that there will be similarities in the conditions in the future with the conditions faced in the past time period from where the data is derived for the forecasting. We do not attempt or anticipate to find out the things lying in the future and the different drawbacks or bumps could be faced in the future. This is the main reason that this forecasting method is related to the car driving by looking in the rearview mirror. It represents where someone has been but in no way, it makes the person equip for the road ahead and how he can maneuver and navigate the road to be covered.
When a new business is started, or a patent idea needs funding, venture capitalists or investment bankers will want to see a business plan that includes forecast information related to profit and loss statements. What type of forecasting information do you think would the investors be looking for? Why?
In this case, the investors can look for the data derived from the time series. It can be seen as a time-ordered sequence of observations which is taken at a constant interval which can range from hourly, daily, weekly, monthly or yearly. These data can be in the form of demand measurement, measurement of earnings, profits, shipments, accidents, precipitation, output, consumer price index or productivity.
As per the time series data which is derived with an assumption that past value can be utilized to estimate the future value of time series. Apart from this, the time series data analysis requires the analysis if the fundamental behavior of the series by the analyst. This can be obtained commonly by plotting the data and having a visual examination of the plot.
I request you to kindly rate the answer as thumbs up. Thanks a lot.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.