The sales forecast is the key to developing a reasonable budget and financial forecast. It is the most challenging forecasting component since there is so little control over the variables that influence sales. All other budgeted items are a function of the sales budget and AFN (additional funds needed) levels which are forecasted. A simple forecasting method is used to predict financial performance and requirements for the next year is the percent increase in sales (POS) method. 1. Name some instances when you do not think that using the Percent-of-Sales (POS) Forecasting technique is appropriate and when it might not be very accurate? 2. If the level of AFN is deemed excessive, what operational, marketing, and financial elements can be changed for the firm to reduce the required level of AFN?
