What are the limitations of Forecasting?

Forecasts are just estimates of future conditions but not indicators of actual position. Future is never certain. Future is almost always shrouded by the shadows of uncertainty and it may be possible that the best laid plan may not yield fruitful results and bad plan may derive supernormal profits to the firm. Uncertaintly places a serious limitation to forecasting.

Another long standing limitation of forecasting is that it is based on certain assumption about the future and as such it involves guess work on the part of managers. In this process, some errors may creep in rendering the forecasts unreliable.

The success of forecasting depends largely on the skillful application of forecasts into practice and the meticulous care that is taken by the managers in preparing forecasts. A forecast should, to be successful, consider arriving at a magic figure not by the fanciful guess work but by a careful analysis of the past events and project them into future more rationally.

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