Marriott Alumni Magazine

Summer 1985 Exchange

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FINANCIAL MODELING COMPUTERS AID FORECASTING ART Brent D. Wilson Forecasting- whether it is estimating the effect of marketing plans, predicting the cost savings from introducing new production methods, or estimating future cash needs-has long been recognized as an art rather than a science. While sophisticated statistical and mathematical techniques have been developed to aid in forecasting, these procedures assist managers in dealing with uncertainty; they do not eliminate it. Financial modeling, an advanced technique for coping with uncertainty, offers considerable advantages to managers. Modeling consists of determining which variables affect the outcome of a situation and defining the relationships among these variables in mathematical terms. If properly used, the modeling process will assist managers in making better-informed decisions. Modeling and "What If" Analysis One reason for the usefulness of modeling is that the technique provides a means for managers to examine the effects of a wide range of variables 18

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