Overcast

Overcast is a type of forecasting error. This error occurs when a business entity or a company is trying to estimate or forecast its future financial entities such as future cash flows, production units required in future, inventory requirement in future, level of efficiency that is required to maintain performance level in the future and related forecast. The error of overcastting occurs when the estimate of a given entity is produced above the value that was actually realized for that entity.

There are a number of forecasting factors that result in the occurrence of overcastting error. One of the major reasons behind overcastting that leads to the estimation of above the realized value results is the use of the wrong inputs while calculating the forecast for that entity. For example let us assume that we are trying to forecast the net income of a company ABC for the coming year. Now in order to calculate the net income we need to forecast the estimated sales of the company and the estimated cost of the goods sold and all the other costs related to the sales. Now the forecasted income will depend on the values of input of sales and the cost. The forecasted figure of the net income will be erratic or above the realized value if we underestimate the costs and overestimate the sales of the company for that year.

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