Using Trend-lines For Forecasting

One of the primary functions of an Excel dashboard is that it can allow for a certain degree of forecasting. While this is of course not an exact science, it can be useful when deciding on long term business strategies. The basic theory behind this approach is that past results generate a particular trend, which can then be used to guess at possible future results.

There are a few approaches to choose from when generating a chart of this kind. If you decide to use your current data to predict a possible future outcome, you must first generate a line chart that displays your existing data. From there you will need to generate a line of best fit. If your data forms a perfect straight line there will be no need to do this, but in a real world scenario this is very unlikely. Therefore your line of best fit will be an approximation which you can use to determine an overall trend.

A very simple way of creating a line of best fit is to create a new data set, with a point identical to the first point on your original data set and a second point identical to the end of your data set. In this way you can create a line between both points, which will be a line of best fit. From there it is a simple process to extend the line of best fit to some point in the near future. This should give you an indication of what kind of figures you can expect at that time.


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