Reference no: EM133177261

Question - In the SteelCo. example from the reading, the FP&A projected future sales by extrapolating sales in the previous three years. Do you agree with this approach for this particular case? What are the implicit assumptions for this approach? What are the potential caveats? What would you do if you were in charge of forecasting sales? Please briefly explain.

In any modeling exercise, we will need to make assumptions. It's important for the FP&A team to be explicit about the assumptions and make sure they are reasonable. Which assumptions in the SteelCo. example draw your attention in terms of importance and being potentially problematic that deserves further investigation?

Both the bottom-up and the top-down approaches can be used to forecast sales. When might you prefer the bottom-up approach? When might you prefer the top-down approach? Please use examples of well-known companies if they help illustrate your view.