Editing Forecasting (section)

{{Other uses|Forecast (disambiguation){{!}}Forecast}}
{{short description|Making predictions based on available data}}

'''Forecasting''' is the process of making predictions based on [[past]] and present data. Later these can be compared with what actually happens. For example, a company might [[Estimation|estimate]] their revenue in the next year, then compare it against the actual results creating a variance actual analysis. [[Prediction]] is a similar but more general term. Forecasting might refer to specific formal statistical methods employing [[time series]], [[cross-sectional data|cross-sectional]] or [[longitudinal study|longitudinal]] data, or alternatively to less formal judgmental methods or the process of prediction and assessment of its accuracy. Usage can vary between areas of application: for example, in [[hydrology]] the terms "forecast" and "forecasting" are sometimes reserved for estimates of values at certain specific [[future]] times, while the term "prediction" is used for more general estimates, such as the number of times floods will occur over a long period.

[[Risk]] and [[uncertainty]] are central to forecasting and prediction; it is generally considered a good practice to indicate the degree of uncertainty attaching to forecasts. In any case, the data must be up to date in order for the forecast to be as accurate as possible. In some cases the data used to predict the variable of interest is itself forecast.<ref>{{cite journal|last1=French|first1=Jordan|title=The time traveller's CAPM|journal=Investment Analysts Journal|date=2017|volume=46|issue=2|pages=81–96|doi=10.1080/10293523.2016.1255469|s2cid=157962452}}</ref> A forecast is not to be confused with a Budget; budgets are more specific, fixed-term financial plans used for resource allocation and control, while forecasts provide estimates of future financial performance, allowing for flexibility and adaptability to changing circumstances. Both tools are valuable in financial planning and decision-making, but they serve different functions.