Financial Forecasting, accounting homework help

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Financial Forecasting (20 points)

People often use “the economy” as an excuse for poor financial forecasting. While it is true that economic factors outside of the control of any corporation can have a devastating effect on an organization’s financial forecast, a good analysis of the internal and external environment can eliminate many false predictions. Discuss three factors in a financial forecast that can be skewed through faulty analysis or through bias, and explain how a financial manager can avoid these pitfalls.

Please respond to two of your peers.

NOTE

1)PLAGIARISM is the main role

2)citations and references should be in APA format


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Explanation & Answer

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Surname 1
Student’s Name
Professor’s Name
Course
Date
Financial Forecasting

A forecast bias occurs when there are consistent differences between actual outcomes
and previously generated forecasts of those quantities; that is: forecasts may have a general
tendency to be too high or too low. A normal property of a good forecast is that it is not biased.
Examples of things that can be biased in financial forecasting
Anchoring
This is a propensity to over-depend on one piece of data or reality set. It thrives in extremely
idealistic conditions. Financial managers may be focused on the activities of a specific rival,
while they ought to be thinking all the more extensively. Or, on the other hand they may support
an approach since they have seen it work before, yet it may not work in another specific
situation.

Hyperbolic Discounting
This is a tendency to heavily discount the future. Hyperbolic discounting presents enormous
risks.

Loss Aversion

Surname 2
Loss aversion can affect financial modeling. An operating plan may elaborat...

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