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Exhibit 18.8.Quarterly sales of a department store for the last 7 years are given in the following table.
The Excel scatterplot shown above indicates that the quarterly sales have an increasing trend and seasonality.Therefore,the linear regression model,Sales = β0 + β1Qtr1 + β2Qtr2 + β3Qtr3 + β4t + ε with three seasonal dummy variables Qtr1,Qtr2 and Qtr3,and the decomposition method are proposed to make sales forecasts.For the regression model,the following Excel partial output is available.
Refer to Exhibit 18.8.(Use Excel. )Using MSE and MAD,compare the linear trend equation with seasonal dummy variables,
,
and the decomposition method equation, with
and the quarterly seasonal indices: 0.9322,1.0066,0.9441,and 1.1171.Which of the two corresponding forecasting models is recommended?
Fixed Stream
A term generally relating to a constant or unchanging flow of income, payments, or data over a period of time.
Subordination Clauses
Provisions in a contract that determine the ranking of claims in the event of a debtor default, making some debts subordinate to others.
Bond Indentures
A legal and binding agreement that outlines the specific promises made to bondholders, including the terms of the bond, such as its maturity date, timing of interest payments, and method of interest calculation.
Senior Creditors
Creditors who have priority over other creditors for the repayment of debts, typically in the event of a bankruptcy or liquidation.
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