A finance manager employed by an automobile dealership belie

A finance manager employed by an automobile dealership believes that the number of cars sold in his local market can be predicted by the interest rate charged for a loan.

The finance manager performed a regression analysis of the number of cars sold and interest rates using the sample of data above. Shown below is a portion of the regression output.

Are there factors other than interest rate charged for a loan that the finance manager should consider in predicting future car sales?

Is interest rate charged for a loan the most important factor to be considered in predicting future car sales? Explain your reasoning.The dealership’s vice-president of marketing has requested a sales forecast at the prevailing interest rate of 7%.

As finance manager, what reasons would you convey to the vice-president in recommending this forecasting model?

Is the prediction of car sales at 7% a reflection of the current downturn in the economy? How might this impact the dealership’s business?

Solution

He need to know the Volume of sales made in prior periods

determine the amount of sales is necessary to know if the company has the necessary capacity to achieve the goals of the market area; but it is also important to note that the productive capacity depends on investment capacity can have a business and it depends on the plans, programs and projects that have high management. Likewise, the financial capacity take part when the existing funds are not sufficient to meet the expectations of investment, production and marketing. In other words, I could not get to a sales forecast a lower error margin without the concurrence of all area compañía.En this vein, predicting sales can become a very useful tool to achieve positioning and success of the company. However, if this prediction is wrong, the consequences can be very serious. A miscalculated demand can lead to the following problems to a company: If demand is lower than installed capacity, the company incurs costs for depreciation on fixed costs and raw materials among others, making the opportunity cost increases affecting in the near goals of profitability and liquidity by low sales turnover future. If demand is greater than capacity, dissatisfied customers may divert their attention to other companies in the sector losing competitiveness achieved so far.

If the person in charge of the projections is knowledgeable about your organization expands and the environment to which the company belongs, a trend analysis on sales is a method with high probability of success for the future of the company.