Tigers Ltd. sells tiger related paraphernalia and has been in operation since 2011. The company...
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Accounting
Tigers Ltd. sells tiger related paraphernalia and has been in operation since 2011. The company is trying to estimate its future sales. Its past sales were as follows:
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
5
7
9
10
11
15
16
23
22
21
The company hired a business consultant who performed a regression analysis to estimate its future sales which yielded the following equation:
Y = 2.1x + 2.5 (R^2 = 0.93)
The consultant indicated that replacing 11 into the equation should yield the next years sales estimate, 12 for the year thereafter and so on. The estimate for 2021 is R25.6 million.
One of the larger store managers indicated that they feel that it is overoptimistic as his store sales has been flat over the past two years.
Required: Briefly advise the management of Tigers Ltd. on the objective forecasting technique used and argue who is correct in this case (support your argument with facts from the question and theory).
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