Forecasting with Indices

Forecasting with Indices

Kirsteen Ferrell

QRB 501

February 11, 2013

Ohidul Siddiqui

Forecasting with Indices

Coca-Cola began in 1886, more than 125 years ago, at a humble five cents per glass! Business has changed, and Coca-Cola with it, in those 125 years. Coca-Cola’s adaptability to changes allows it to grow. To continue growing for another 125 years it must not only be able to see where it has been, but where it is going and how it will get there. Doing so involves forecasting with indices.

Forecasting with indices requires data. This data is acquired throughout the year, every year. Even though more can be better, Coca-Cola has too much information to work with. For the sake of simplicity only the quarterly reports for the last four years will be used. Forecasting is done by averaging the percentage increase each quarter.

Averaging the percentage increase is done by finding the percentage increase from 2009 to 2010, 2010 to 2011, and 2011 to 2012, adding them together and dividing the answer by three. This will then be multiplied to the most recent year’s quarterly inventory, 2012, for which that answer is added back to the most recent year’s quarterly inventory.

Year/Quarter | 1 | 2 | 3 | 4 |

2009 | $2,298 | $2,483 | $2,341 | $2,187 |

2010 | $2,327 | $2,363 | $2,259 | $2,354 |

2011 | $3,033 | $3,237 | $3,172 | $2,650 |

2012 | $3,442 | $3,587 | $3,447 | $3,092 |

2013 | $3,959.29 | $4,100.74 | $3,970.75 | $3,472.21 |

("Coca-Cola," 2013).

The first quarter’s 2009 inventory was $2,298, 2010’s was $2,327, 2011’s $3,033, and 2012’s $3,442. Finding the percentage increase for 2009 to 2010 one subtracts $2,298 from $2,327. This is $29. The $29 is divided by $2,298 to get 1.262, the percentage increase from 2009 into 2010. For the first quarters the percentage increase is 15.029%. The $3,442 from the first quarter of 2012 is then multiplied to the 15.029% increase average of the first quarters, $517.29. This is added back to $3,442, making...