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Forecasts play a crucial role in the development of business plans and budgets. They offer valuable insights and projections on product demand, inventory levels, cash

Forecasts play a crucial role in the development of business plans and budgets. They offer valuable insights and projections on product demand, inventory levels, cash flow, and other important factors that are required at the beginning of the budgeting process. It is imperative to use reliable methods for forecasting as many business decisions rely heavily on accurate forecasts.

The Investopedia article titled Forecasting: What It Is, How Its Used in Business and Investing, highlights a few key takeaways that are helpful in understanding forecasting concepts, that I have bulleted below (Tuovila, 2023):

  • Forecasting involves making predictions about the future.
  • In finance, forecasting is used by companies to estimate earnings or other data for subsequent periods.
  • Traders and analysts use forecasts in valuation models, to time trades, and to identify trends.
  • Forecasts are often predicated on historical data.
  • Because the future is uncertain, forecasts must often be revised, and actual results can vary greatly.

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