Here is a compilation of term papers on the ‘Forecasting’ for class 11 and 12. Find paragraphs, long and short term papers on the ‘Forecasting’ especially written for school and college students.

Term Paper on Forecasting


Term Paper Contents:

  1. Term Paper on the Definition of Forecasting
  2. Term Paper on the Steps in Forecasting
  3. Term Paper on the Techniques Used for Forecasting
  4. Term Paper on the Merits of Forecasting
  5. Term Paper on the Limitations of Forecasting

Term Paper # 1. Definition of Forecasting:

Forecasting is the process of using past events to make systematic predictions about the future. It is nothing but peeping into the future. It is the process of estimating the relevant events of future by analysing the past and present behaviour of such events. One cannot probe into the future unless one knows how the events have occurred in the past and how they are behaving in the present. On the basis of analysis of past and present events a prediction about the future can be made with the help of various techniques.

Forecasting is an important tool in planning. It is a systematic attempt by the business to probe the future on the basis of known facts. Forecasting is, thus, a process wherein predictions are made in a systematic manner step by step in a scientific way.

The following are the few definitions on forecasting for better understanding of the concept:

Louis. A. Allen:

“Forecasting is a systematic attempt to probe the future by inference from known facts.”

C.E. Sultom:

Business forecasting is the calculation of probable events, to provide against the future. It, therefore, involves a look-ahead in business and an idea of predetermination of events and their financial implications as in the case of budgeting.

Neter and Wasserman:

“Business forecasting refers to the statistical analysis of the past and current movement in the given time series so as to obtain clues about the future pattern of those movements”.

On the basis of the definitions given above a features of forecasting may be identified as follows:

(a) Forecasting relates to future. So it is needed for planning as it devises future course of action.

(b) In business past and present events are essential for forecasting and the experience of the person making forecasting form the basis of forecasting.

(c) Business forecasting is an estimate for the future. It defines the probability of happening an event in the future which may or may not happen.

(d) The ultimate decision about the future is made with the help of mathematical and statistical tools and techniques. However, personal observations can also help in the process of estimation of the future.


Term Paper # 2. Steps in Forecasting:

Forecasts are estimates of future events. They are projected systematically step by step by using certain statistical techniques. It guards against guess work. Guesswork is also used in forecasting to minimum extent.

This is done with the help of:

(i) Factual data

(ii) Proper analysis of economic forces

(iii) Well derived mathematical formula

(iv) Intelligent judgement

(v) Experience is taken in the right earnest and end results may be used safely.

The steps used in forecasting are:

(i) Developing the groundwork.

(ii) Estimating the future business.

(iii) Comparison of actuals with estimates.

(iv) Refining forecasts.

(i) Developing the Groundwork:

In this primary step collection, compilation and analysis of statistics is done regarding several factors like products, financial position of the organisation, market conditions, general economic and business conditions, government policy and other matters are examined carefully. The investigation should be made how these have been developed in the past and how they have affected each other. The analysis of these factors made from the groundwork of the entire forecasting technique.

(ii) Estimating the Future Business:

The second step is to estimate the future of the business on the basis of the known facts about the past and the present. This is done with the help of statistical techniques. The end result represents the projection of trends and they may be subject of margin of errors. They cannot be the absolute guide to action. The trends may be subject to modifications on the basis of manager’s judgement, intelligent guess and reflective thinking before arriving at a decision as to what the future holds.

(iii) Comparison of Actuals with Estimates:

The third step is to observe the results and then the management should compare the actual results with anticipated ones periodically. In forecasting this post mortem can be done with the object of focussing on deviations. The deviations should be thoroughly investigated and reasoned out. Unanticipated gains and losses are to be investigated. It should facilitate corrective action to minimize deviations in future.

(iv) Refining Forecasts:

This can be attempted in the light of factors traced, experience and proficiency acquired with a view to meet the needs of the situation. This will make the forecasting results more reliable and authentic. Managers should always approach forecasting with an open mind. They must accept changes without reservations. They should always remember the fact they are aiming at a moving and unpredictable target.


Term Paper # 3. Techniques Used for Forecasting:

From the olden days people were using various techniques for assessing the future events. In recent years various forecasting techniques have been developed to handle increasing variety of complex problems arising out of the planning process. The techniques are classified into two types known as qualitative techniques and quantitative techniques.

Qualitative techniques employ human judgement to make future estimates and can be used when data are scarce. Not all factors can be easily quantified or measured, when trying to predict the future. In these cases the managers can rely on qualitative forecasting techniques like rating schemes that transform subjective judgements, accumulated knowledge and opinions into quantitative estimates.

A. Qualitative Techniques:

The various methods used here are:

(i) Hunches and intuition and

(ii) Collective opinion.

(i) Hunches and Intuition:

One of the commonly used techniques from time immemorial. Every manager makes use of it in the absence of available data and if they are successful in their venture they continue with this approach. This is the most unscientific method and it can be employed only with very great risk of unimaginable problems. It is neither based upon facts nor estimates but only conjectures.

(ii) Collective Opinion:

In this method, collective opinion of knowledgeable persons often provides a fairly reliable prediction.

This method is based on estimates of experts. This method is subject personal bias in those making predictions.

The managers can make use of any one of the following:

(i) Brain Storming

(ii) Delphi Technique

(iii) Scenario Construction

(i) Brain Storming:

In this technique individuals or group members try to improve creativity by spontaneously proposing alternatives without concern for reality or tradition. In forecasting a group meeting is conducted on a problem with the object getting ideas however strange, they may be. The object is to have free flow of ideas to generate positive solutions to the problem. This is suitable for getting creative ideas for new and solution to complex problems.

(ii) Delphi Technique:

This is named after the ancient Greek oracle at the city of Delphi. This is a qualitative forecasting technique that uses group brain storming to reach a consensus and insight into the future.

Under this method, a panel of experts related to a particular problem area is prepared. The experts are kept apart and their identity is kept secret from one another. This is done to prevent influencing others and to eliminate the possibility of the emergence of a band-wagon mentality.

A questionnaire is prepared and sent to them for getting their response. The responses are collected and studied carefully to separate answers to questions on which there is a consensus and issues where no consensus have been arrived at.

The first round feedback of answers without consensus is supplied to the experts and they are requested to communicate the reasons for their divergence. The same process is employed to narrow down differences.

This process is continued till the experts re-evaluate their estimates and a better convergence of opinion emerges or at least the scatter of opinions gets nar­rowed. The final result is taken as the forecast. It should be noted that this method would not give only one answer in all cases.

(iii) Scenario Construction:

This method is used for long-range forecasts. It is a logical description of events. A well-constructed scenario may explore each or re-adjustment may produce an accurate forecast.

B. Quantitative Techniques:

The methods employed are:

(i) Time series analysis

(ii) Statistical Techniques and

(iii) Econometric models

(iv) Historical Perspective

(v) Morphological research method

(vi) Relevance Test method.

(i) Time Series Analysis:

Quantitative forecasting makes its predictions by using mathematical rules to manipulate existing data about certain variables.

Here there are two types to be considered:

(i) Time series analysis and

(ii) Casual forecasting.

Time series data is collected at regular intervals of time i.e. days, weeks, months. Time series analysis that predicts changes in just one variable over time. The time series data have four components.

They are:

(i) Trend component

(ii) Seasonal component

(iii) Cyclical component

(iv) Random component.

Trend component means a long-term pattern of growth or decay. It has some general value for strategic planning. The term seasonal component means a periodic fluctuation relating to a certain recurring event. Cyclical component refers to fluctuations that vary in duration and amount.

Random component includes a chance or unpredictable events which would introduce errors in the forecast. The time series analysis is to average the last few periods of data, which produces a model that is very responsive to a change.

The time series analysis is the best indicator of a trend. It provides an initial approximation forecast that considers empirical regularities which may be expected to persist. After identifying and measuring seasonal effects, the original may be adjusted for these influences, yielding a new historical time series consisting of the trend and seasonally adjusted data.

The new time series may be in the analysis and interpretation of cyclical and residual influences. This method has certain limitations also. They are: It may give misleading results in some cases where the future does not reflect the past. This method can be effectively used only when data for several years are available.

Extrapolation is the most elementary method of forecasting. It merely projects the past trends. It involves time-series analysis and exponential smoothing. As already observed time-series analysis assumes that identified numerical relationships will exist in the future. Exponential smoothing is a form of moving average, but with refinements.

The extrapolation technique is suitable and reliable method of prediction in situations where changes are slow to take place. This technique should not be used alone. It should be supplemented by statistical, econometric techniques coupled with practical judgement. This technique is used frequently for sales forecasts and other estimates when other forecasting methods may not be justified.

(ii) Statistical Techniques:

In statistics casual forecasting means forecasting that predicts how a dependent variable is affected by changes in independent variables. A dependent variable is one whose value depends on the value of an independent variable. An independent variable is one whose value does not change when the value of other variables are changed.

Casual forecasting can be based on regression analysis. This is a statistical tool for predicting the effect of various combinations of independent variables will have on a dependent variable. This technique is useful for indicating tong-term trends and making forecasts about the availability of resources.

Correlation technique establishes relationship between two or more variables. The greater the extent that one variable moves in the same direction as another variable the closer the correlation. If the variable moves in the opposite direction from each other the correlation co-efficient is negative. If they have no relation then the correlation co-efficient is zero.

(iii) Econometric Models:

This means the application mathematical economic theory and statistical procedures to economic data to verify economic theorems and to establish quantitative results. The development of econometric model requires sufficient data for establishing correct relationship. These models bring out in quantitative terms the way in which various aspects of a problem are interrelated.

(iv) Morphological Research Method:

This method is used to find out all possible technological alternatives which can be derived from the various permutations and combinations of the variables of the parameters relevant to the solution of the problem.

(v) Relevance Tree Method:

This helps in determining and predicting ways of achieving them. According to this method, the feasibility of future objective is judged first of all, and then by working backwards, attempt is made to find the technological innovations needed to achieve the objective. It is used to develop alternatives and determine the most desirable course of action.

(vi) Historical Perspective:

This technique uses “Business Barometers” for business forecasts. The term Barometer is used to indicate the economic situation. The assumption of this approach is that the future can be predicted with the help of certain happenings of the present. The various barometers which are used in forecasting are Gross national product, wholesale prices, consumer prices etc.


Term Paper # 4. Merits of Forecasting (Significance or Importance of Forecasting):

Forecasting is an essential element of Planning. It means estimating the future on a systematic basis. Every manager makes forecasts of one thing or the other. Forecasting is a necessary activity for any business right from its inception. The importance of forecasting is apparent from the role it plays in planning.

Forecasting is an important part of effective Planning. Forecasting helps in sound policy decisions which are necessary for the achievement of organisational objectives. By focusing on future forecasting assist in bringing unity of purpose in planning.

The advantages of forecasting are:

(i) Forecasting Acts as Basis for the Promotion of Business:

Promoters at the time of starting a new venture should study must know after the word know leave space and type how the various factors in the environment will behave over a period of time. The promoters will try to concentrate on future and on the assumption of risks involved on the basis of forecasting.

If the promoters are satisfied with the risks involved and they feel they can assume risks they can face the situation with effortless ease. Otherwise, it will be a wild jump into the future. So forecasting provides the basis for promotion of a business.

(ii) Key to Planning:

Forecasting provides the basis for planning and it is an essential ingredient of planning. Planning without forecasting is not possible. Planning decides the future course of action and this can take place under certain circumstances and conditions which are predicted by forecasting.

Forecasting decides what will happen in future on the basis of past happenings and which are being occurred in the present with the help of some techniques. Forecasting provides the knowledge of various planning premises within which managers can analyse their strength and weakness and can take appropriate actions in advance. On the basis of forecasting, planning decides the course of action. The managers can make necessary modifications to meet the requirements of the situation.

(iii) Forecasting Facilitates Co-Ordination and Control:

Co-ordination and control are facilitated by forecasting indirectly. Information needed for assessing the future is collected from internal and external sources. This provides an opportunity for promoting interaction for better unity and co­ordination in the planning process between the various departments.

Forecasting provides relevant information for exercising control. The information supplied by various units in the organisation about actual performance is used for forecasting. This facilitates them to know the potentials of the organisation. By focusing on weaknesses and deviations performance can be improved.

(iv) Facilitates Success in Organization:

Business always operates in uncertainties and risks. They affect the profits of the business. Risks depend on future happenings and forecasting provides help to overcome uncertainties. If the managers are able to assess the uncertainties and risks in advance the managers can take alternative action to avoid the risks and save the business from the untoward happenings. Thus forecasting provides insurance against risks. Further it cannot check the future happenings but it can provide clues to the managers and facilitate them to take alternative actions.

(v) Forecasting Improves the Quality of Management:

Forecasting is based on thinking and rethinking of the problems to be faced by the management in future, on the basis of past experiences. The managers are to choose from the alternatives the right alternative to be pursued. They identify the strength and weaknesses of each alternative to identify the correct one. The managers are to take a decision whenever there is a change in the circumstances. Thereby it develops mental faculties of managers. So the quality of decisions improves effectively.

(vi) Forecasting Helps in Achieving Objectives.

Every organisation establishes objectives to be achieved by the performance of certain activities. The outcome depends on the future events and the way in which these activities are being performed. Thus, forecasting is relevant in achieving the objectives.


Term Paper # 5. Limitations of Forecasting:

Forecasting is the process of estimating the relevant future for the organisation by analysing the past and present behaviour of such events. If future could be accurately predicted planning could be made without any fear. The manager must be well aware of the limitations of forecasting while making plans.

The important limitations are:

(i) Forecasting is Based on Assumptions:

Forecasting is the prediction of future on the basis of certain assumptions. One of the assumptions is that events occur on a regular pattern. The changes are not made haphazardly and speedily. The trend is projected on the basis of past data and experience. This assumption is not good. There are various factors which affect the trend. The behaviour of all these factors may not be similar.

A change is only one factor may be so imperative and unpredictable that it may disturb the entire business. Forecasts can simply suggest that if an event happened this way in the past, the future happening can be suggested. So it assumes normal happenings. It cannot foresee abnormal happenings.

(ii) Forecasting are Perfectly Not Correct:

Forecasts are not always correct irrespective of the fact that makes use of mathematical and statistical techniques. The techniques suggest the relationship among known facts. Setting a trend is not going to guarantee that a particular event will happen in a particular way. It is so because the factors which are taken into account for making forecasts are affected by human factor which is quite predictable. Forecasts contain error. Degree of error depends on many factors including the human factor. So managers are to be conscious of this point.

(iii) Forecasting is Costly and Time Consuming:

Forecasting requires certain data which may be available within or outside the organisation. The available information is to be compiled, tabulated and analysed in a fruitful manner. Some information may be in qualitative form and this must be converted into quantitative form. All this involves lot of time and money. The manager is to consider the time and cost involved in forecasting and the resultant benefit. So this cannot be resorted to by small organisations.


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