Forecasting can be defined as a process in which historical or previously collected data is used to forecast the trends for the future. Forecasting is a tool that is used by the companies, financial institutions and business entities to find out the future trends and to plan regarding the use of their budget for the upcoming period of time. The forecasting is basically done on the demand of the goods in a certain accounting period or a seasonal duration. The companies forecasting the future calculate the demand of the goods and the service they offer and the production cost of the goods in order to meet demand. Forecasting is also used as a tool for the business investors as it help them in order to find out whether a company is able to meet its demand and what will the factors that will affect the sales of the companies in future. Investors can also use forecasting as a tool that will help investor to know whether the sales demand of the company will result in an increase or decrease in the sales price of the shares of the company in the market. Forecasting can be also used as a benchmark for the firms that have long term perspective of operations.
In addition companies and business firms a stock market also uses forecasting as a tool to determine the stock price of an entity in future. There are a number of forecasting methods that can used to measure or estimate the future trends. For example they can have a look on the revenues or they can compare the revenue with economic indicators to find out the future trends and future estimations.