In Steel Co, the FP&A projected future sales by extrapolating sales in the previous three years. Is this approach agreeable in this particular case? What are the implicit assumptions for this approach? What are the potential caveats? What can be done in the case of being in charge of forecasting sales? Please briefly explain.

In any modeling exercise, we will need to make assumptions. The FP&A team needs to be explicit about the beliefs and make sure they are reasonable. Which assumptions in the Steel Co. example draw your attention in terms of importance and potentially problematic that deserves further investigation?

Both the bottom-up and the top-down approaches can be used to forecast sales. When might you prefer the bottom-up approach? When might you like the top-down approach? Please use examples of well-known companies if they help illustrate the view.