What are the Quantitative Techniques of Financial Forecasting?

1. Proforma Financial Statements:

   Proforma statements use sales figures and costs from the previous two to three years after excluding certain one-time costs. This method is mainly used in mergers and acquisitions, as well as in cases where a new company is forming and statements are needed to request capital from investors.

2. Time-Series Forecasting:

   Time-series forecasting is a popular quantitative forecasting technique, in which data is gathered over a period of time to identify trends. Time-series methods are one of the simplest methods to deploy and can be quite accurate, particularly over the short term. Some techniques that fall within this method are simple averaging and exponential smoothing.

3. Cause-Effect Method:

   Here, the forecaster examines the cause-and-effect relationships of the variable with other relevant variables such as changes in consumers’ disposable incomes, the interest rate, the level of consumer confidence, and unemployment levels.  This method uses past time series on many relevant variables to produce the forecast for the variable of interest.

Qualitative Techniques of Financial Forecasting

Executive Opinions:

Reference class Forecasting

Delphi Technique

Salesforce 

Scenario writing