[go: up one dir, main page]
Scribd
Upload
115 views3 pages

Through These Plotted Points. A Free Hand Line Is Drawn in Such A Way

Uploaded by

Krisha Ann Rosales

The Trend Projection Method is a classical business forecasting method that analyzes long-term time-series data. It assumes factors influencing past trends will continue to do so in the future. This method fits trend lines and equations to sales data to project future demand. It requires a large amount of reliable historical data but is simple to use with limited data needs. However, it assumes past rates of change will remain constant and cannot account for relationships between variables or short-term fluctuations.

Copyright:

© All Rights Reserved
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt

Through These Plotted Points. A Free Hand Line Is Drawn in Such A Way

Uploaded by

Krisha Ann Rosales
115 views3 pages
The Trend Projection Method is a classical business forecasting method that analyzes long-term time-series data. It assumes factors influencing past trends will continue to do so in the future. This method fits trend lines and equations to sales data to project future demand. It requires a large amount of reliable historical data but is simple to use with limited data needs. However, it assumes past rates of change will remain constant and cannot account for relationships between variables or short-term fluctuations.

Original Title

trend projection

Copyright

© © All Rights Reserved

Available Formats

DOCX, PDF, TXT or read online from Scribd

Did you find this document useful?

Is this content inappropriate?

The Trend Projection Method is a classical business forecasting method that analyzes long-term time-series data. It assumes factors influencing past trends will continue to do so in the future. This method fits trend lines and equations to sales data to project future demand. It requires a large amount of reliable historical data but is simple to use with limited data needs. However, it assumes past rates of change will remain constant and cannot account for relationships between variables or short-term fluctuations.

Copyright:

© All Rights Reserved
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
115 views3 pages

Through These Plotted Points. A Free Hand Line Is Drawn in Such A Way

Uploaded by

Krisha Ann Rosales
The Trend Projection Method is a classical business forecasting method that analyzes long-term time-series data. It assumes factors influencing past trends will continue to do so in the future. This method fits trend lines and equations to sales data to project future demand. It requires a large amount of reliable historical data but is simple to use with limited data needs. However, it assumes past rates of change will remain constant and cannot account for relationships between variables or short-term fluctuations.

Copyright:

© All Rights Reserved
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 3

The 

Trend Projection Method is the most classical method of business


forecasting, which is concerned with the movement of variables through time.
This method requires a long time-series data.

The trend projection method is based on the assumption that the factors liable
for the past trends in the variables to be projected shall continue to play their
role in the future in the same manner and to the same extent as they did in the
past while determining the variable’s magnitude and direction.

In predicting demand for a product, the trend projection method is applied to


the long time-series data. The trend projection method includes three
techniques based on the time-series data. These are:

1. Graphical Method: It is the most simple statistical method in which


the annual sales data are plotted on a graph, and a line is drawn
through these plotted points. A free hand line is drawn in such a way
that the distance between points and the line is the minimum. Under this
method, it is assumed that future sales will assume the same trend as
followed by the past sales records. Although the graphical method is
simple and inexpensive, it is not considered to be reliable. This is
because the extension of the trend line may involve subjectivity and
personal bias of the researcher.
2. Fitting Trend Equation or Least Square Method: The least square
method is a formal technique in which the trend-line is fitted in the
time-series using the statistical data to determine the trend of demand.
The form of trend equation that can be fitted to the time-series data can
be determined either by plotting the sales data or trying different forms
of the equation that best fits the data. Once the data is plotted, it shows
several trends. The most common types of trend equations are:

3. Box-Jenkins Method: Box-Jenkins method is yet another forecasting


method used for short-term predictions and projections. This method is
often used with stationary time-series sales data. A stationary time-
series data is the one which does not reveal a long term trend. In other
words, Box-Jenkins method is used when the time-series data reveal
monthly or seasonal variations that reappear with some degree of
regularity.

Trend Projection Method:


Trend projection or least square method is the classical method of
business forecasting. In this method, a large amount of reliable data is
required for forecasting demand. In addition, this method assumes
that the factors, such as sales and demand, responsible for past trends
would remain the same in future.

In this method, sales forecasts are made through analysis of past data
taken from previous year’s books of accounts. In case of new
organizations, sales data is taken from organizations already existing
in the same industry. This method uses time-series data on sales for
forecasting the demand of a product.

The main advantage of this method is that it is simple to use.


Moreover, the data requirement of this method is very limited (as only
sales data is required), thus it is inexpensive method.

However, this method also suffers from certain limitations,


which are as follows:
1. Assumes that the past rate of changes in variables will remain same
in future too, which is not applicable in the practical situations.
2. Fails to be applied for short-term estimates and where trend is
cyclical with lot of fluctuations

3. Fails to measure relationship between dependent and independent


variables.

The main advantage of this method is that it is applicable even in the


absence of past data. However, this method is not applicable in case of
new products. In addition, it loses its applicability when there is no
time lag between economic indicator and demand.

You might also like