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The importance of statistics lies in the extent to which it serves as the basis for making reliable forecasts, against arbitrary forecast with no statistical background.
Forecasting is a scientific process which aims at reducing the uncertainty of the future state of business and trade, not dependent merely on guess work, but with a sound scientific footing for the decision on the future course of action.
Forecasting refers to the analysis of past and present conditions with a view of arriving at rough estimates about the future conditions.
According to T.S. Lewis and R.A. Fox “Forecasting is using the knowledge we have at one time to estimate what will happen at some future moment of time”.
Forecasting is an important tool that serves many fields including business and industry, government, economics, environmental sciences, medicine, social science, politics and finance. Forecasting problems are often classified as short-term, medium-term, and long-term.
Short-term forecasting problems involve predicting events for a few time periods (days, weeks, months) into the future.
Medium-term forecast extends from one to two years into the future.
Long-term forecasting problems can extend beyond that by many years.
Short and medium-term forecasts are required for activities that range from operations management to budgeting and selecting new research and development projects. Long term forecasts impact issues relating to strategic planning.
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