CONVENTION STEPS IN FORECASTING
envNOTES
By: REPULDA CHRISTINE L.
CHAPTER 7 TIME SERIES
FORECASTING
REGRESSION ANALYSIS – useful in short-
term forecasting but flawed
BETTER APPROACH – based the forecast of
a variable on its own history.
TWO IMPORTANT FEATURES OF TIME-
SERIES MODELS
 Uses historical data for the
phenomenon we wish to forecast.
 We seek a routine calculation to
apply to a large of number of cases
and that may be automated,
without relying on qualitative
information about the underlying
phenomena.
SHORT TERM FORECASTS – often used in
situations that involve forecasting many
different variables at frequent intervals.
MAJOR COMPONENTS (an HYPOTHESIZED
MODEL)
 A base level
 A trend
 Cyclic fluctuations
n-period moving average – builds a forecast
by averaging the observations in the most
recent n periods.
xt – observation made in period t
At – moving average calculated after
making the observation in period t
1. Make the observation in period t
2. Carry out the necessary calculations
3. Use the calculations to forecast
period (t + 1)
What number of periods to include in
moving average?
o There is no definite answer, but
there is a trade-off to consider.
Suppose the mean of the underlying
process remains stable:
If we include very few data points, then the
moving average exhibits more variability
than if we include a larger number of data
points. In that sense we get more stability
from including more points.
Suppose there is an unanticipated change
in the mean of the underlying process:
If we include very few data points, our
moving average will tend to tracked the
change process more closely than if we
include a larger number of data points. In
that case we get more responsiveness from
including fewer points.
MEASURES OF FORECAST ACCURACY
o MSE (Mean Squared Error)
between forecast and actual
o MAD (Mean Absolute
Deviation) between forecast and
actual
o MAPE (Mean Absolute
Percent Error) between forecast and
actual
MAD & MAPE – similar, one is absolute, the
other is relative.
MAPE – usually reserved for comparisons in
which the magnitudes of two cases are
different.
EXCEL’S DATA ANALYSIS TOOL
DATA>ANALYSIS>DATA
ANALYSIS>MOVING AVERAGE
o Contains an option for calculating
moving average.
NOTE: Excels assumes that the data appear
in a single column, and the tool provides an
option of recognizing a title for this column,
if it is included in the data range.
NOTE: Other options include a graphical
display of the actual and forecast data and a
calculation of the standard error after each
forecast.
EXPONENTIAL SMOOTHING – weighs
recent observations more than older ones.
S t = ax t + (1 – a) S t-1
Where:
a – smoothing constant – some number
between zero and one.
S t – smooth value of the observation
(our “best guess” as to the value of the
mean.
Forecasting procedure – sets the forecast
F t+1 = S t
EXCEL’S DATA ANALYSIS TOOL – contains
an option for calculating forecasts using
exponential smoothing.
EXPONENTIAL SMOOTHING MODULE –
resembles the Moving Average module, but
instead of asking for the number of periods,
it asks for damping factor, which is the
complement of the smoothing factor or
(1-a).
NOTE: Option exist for chart output and for
a calculation of the standard error.
HOLT’S METHOD – this is more flexible
procedure uses two smoothing constant, as
shown in the following formulas.
S t = ax t + (1-a) (S t-1 + T t-1)
T t = B (S t – S t-1) + (1 – B) T t-1
F t+1 = S t + T t
Note: We can take exponential smoothing
model further and include a cyclical (or
seasonal) factor.
FOR CYCLICAL EFFECT, THERE ARE 2 TYPES
OF MODELS
o Additive Model
o Multiplicative Model
SUMMARY:
 Moving averages and exponential
smoothing are widely used for
routine short-term forecasting.
 By making projections from past
data, these methods assume that
the future will resemble the past.
 However, the exponential
smoothing procedure is
sophisticated enough to permit
representations of a linear trend and
a cyclical factor in its calculations.
  Exponential smoothing is
productive.
 Implementing an exponential
smoothing procedure requires that
winitial values be specified and a
smoothing factor be chosen.
 The smoothing factor should be
chosen to trade off stability and
responsiveness in appropriate
manner.
 Although Excel contains a Data
Analysis tool for calculating Moving-
Average forecast, the tool does not
accommodate the most powerful
version of exponential smoothing,
which includes trend and cyclical
components.
CHAPTER 8 NON LINEAR
OPTIMIZATION
Optimization – find the best set of
decisions for a particular measure of
performance.
INCLUDES:
o The goal of finding the best set
o The algorithms (procedures) to
accomplish this goal.
EXCEL OPTIMIZATION SOFTWARE
 Solver
– Standard with excel
 Analytic Solver Platform
– comes with text – Install off text
CD
– More advanced than standard solver
– Is preferred tool throughout text
DECISION VARIABLES – levers used to
improve performance. Want the best values
for the variables
FINDING THE BEST VALUES
 Need Solver’s sophisticated
software
 Still relatively easy to construct
models beyond Solver’s capability
FORMULATION
Decision Variables – What must be
decided? Be explicit with units.
TACTIC – What measure compares decision
variables? Use only one measure (“as a yard
stick”)- put it in target cell
Constraints – What restrictions limit our
choice of decision in variables?
CONSTRAINTS
o Left-handed-side (LHS) – usually a
function.
o Right-handed-side – usually a
number (ex: a parameter)
3 TYPES OF CONSTRAINTS
 LT CONTRAINTS (LHS<RHS) less than
– capacity or ceilings
 GT CONSTRAINTS (LHS>RHS) greater
than –shflawed Commitment or
thresholds.
 EQ CONSTRAINTS (LHS=RHS) equal –
material balance and define related
variables consistently.
LAYOUT
 Standard model is advisable.
 Enhance ability to communicate
 -provides common language Throughout optimization, generally
-Reinforces understanding how only some constraint is binding.
models shaped
INTERPRETING RESULTS:
Improves ability to spot
OPTIMIZATION SOLUTION
modeling errors
 Enables “scaling up” more easily o TACTICAL INFORMATION – plan
for decision variables.
LAYOUT
o STRATEGIC INFORMATION –
 Organize worksheet in modules What factors could lead to better
-Decision variables, objective level of performance? Binding
function, constraints constraints are economic factor
 Place decision variables in single row that restrict the value of the
(or column) objective.
 Use color or border highlighting
MODEL CLASSIFICATION AND THE
 Place objective in single highlighted
NONLINEAR SOLVER
cell
 Arrange constraints for visual o LINEAR OPTIMIZATION OR LINEAR
comparison of LHS and RHS PROGRAMMING – objective and all
constraints are linear functions of
SOLVER TIP: RANGES FOR DECISION
the decision variables.
VARIABLES
o NONLINEAR OPTIMIZATION OR
 Arrange worksheet with all decision NONLINEAR PROGRAMMING –
in adjacent cells either objective or a constraint (or
-Enables a single reference to their both) are nonlinear functions of the
range decision variables.
-Makes data entry efficient
NOTE: TECNIQUES FOR SOLVING
-Reduce clutter in Solver interface
LINEAR MODEL ARE POWERFUL (use
-Makes task pane description easier
wherever possible)
to interpret
or – technique used by Solver for
INTERPRETING RESULTS
Nonlinear optimization.
o OPTIMAL VALUES OF DECISION
Called LSGRG (Large-Scale Generalized
VARIABLES – best course of action
Reduced Gradient) algorithm
for a model.
o OPTIMAL VALUE OF OBJECTIVE HILL CLIMBING IN A FOG
FUNCTION – best level of
-Try to follow the steepest path going
performance possible.
up
o CONSTRAINTS OUTCOME –
Constraint is tight or binding if
LHS=RHS in LT or GT constraint.
 -After each step, or group of steps,
again find the steepest path and follow
it
-Stop if no path leads up
LOCAL AND GLOBAL OPTIMUM
GLOBAL OPTIMUM – the highest peak
and what we want to find.
LOCAL OPTIMUM – any peak higher
than all points around, it is what the
LSGRG locates.
PROGRAMMING EXAMPLES
 Facility Location
 Revenue Maximization – maximize
revenue in the presence of demand
curve
 Curve fitting – fit a function to
observed data points
 Economic Order Quantity – trade-
off ordering and carrying costs for
inventory
SOLVER TIP: AVOID DISCONTINOUS
FUNCTIONS
A number of functions familiar to
experienced Excel programmers should be
avoided when using nonlinear solver.
These include:
o Logical functions (IF or AND)
o Mathematical functions (ROUND OR
CEILING)
o Lookup and reference functions
(CHOOSE OR VLOOKUP)
SOLVER TIP: WHAT KIND OF SENSITIVITY
ANALYSIS?
OPTIMIZATION SENSITIVITY – determines
how the optimal solution changes with a
change in a parameter.
PARAMETRIC SENSITIVITY – answers how
specific output change with parameters.
EXCEL MINI LESSON: THE COVAR FUNCTION
COVAR FUNCTION IN EXCEL – calculates the
covariance between two-equal sized sets of
numbers representing observations of two
variables.
COVARIANCE – measures the extent to
which one variable tends to rise or fall with
increases and decreases in the other
variable.
NOTE:
IF TWO VARIABLES RISE AND FALL IN
UNISON, THEIR COVARIANCE IS LARGE AND
POSITIVE.
IF THE TWO VARIABLES MOVE IN OPPOSITE
DIRECTIONS, THEN THEIR COVARIANCE IS
NEGATIVE.
IF THE TWO VARIABLES MOVE
INDEPENDENTLY, THEN THEIR COVARIANCE
IS CLOSE TO ZERO.
EXCEL SOLVER – collection of optimization
procedures the Nonlinear Solver is Solver’s
default of choice
STEPS:
1. Formulating
2. Solving
3. Interpreting optimization problems
GUIDELINES FOR MODEL BUILDERS ARE THE
CRADT SKILLS TYPICALLY EXHIBITED BY
EXPERTS:
1. Follow a standard form whenever
possible.
2. Enter cells reference in the Solver
window: keep numerical values in
cell.
3. Try out some feasible (and
infeasible) possibilities as a way of
debugging the model and exploring
the problem
4. Test intuition and suggest
hypotheses before running
INCOME TAX REVIEWER

STS NOTES
CHARACTERISTICS OF HUMANS THAT
EVOLVED OVER TIME
 changes in the environment
 increased knowledge
 culture adaptations.
1. WALKING UPRIGHT
- The early records of humanity showed
that humans evolved from four legged
species to walking upright individuals.
- The changes in the physical characteristics
of humans were brought about by
adaptation to the changing environment.
2. USE OF DIFFERENT TOOLS
As humans need to survive, their various
activities such as hunting and fishing led to
advances in tools and tools-making. From
the use of tools made of stone, bone and
wood to tools made of bronze and iron.
3. DOMESTICATION OF ANIMALS
The early humans started to domesticate
animals. They settled in one place, learned
to tame animals and domesticate them.
They also raised animals for clothing,
medicine and shelters. Goats, chicken and
sheep were first domesticated animals.
Larger animals like horses were
domesticated for plowing and
transportation.
4. CHANGES IN HUMAN BODY
As early humans spread to different
environments and changed their diet, they
evolved body shapes that helped them
survive in hot and cold climates.
A. SHORT BODIES AND LONG GUTS
Wide rib cage room for stomach, intestines
and other organs that break down food
B. TALL BODIES AND SHORT GUT
Narrow bodies to help them stay cool
Long legs enable them to travel longer
distances
C. COMAPACT BODIES
Short, wide body to conserve heat
Depended on raw meat and cooked food
D. BONES WERE SMOOTH AND
WEAKER
Human activities became less physically
demanding and diet changed to cooked
meat and other foods
5. COMPLEXITY OF THE BRAIN
As humans evolve, the brain size tripled and
became the largest and the most complex
of any living primate.
The ability of an orgaenism to process
information about its environment is a
driving force behind evolution, the more
information the brain receives and the
faster it can process this information, the
more adequately it will be able to respond
to environmental challenges and the better
will be its chances of survival.
6. SOCIAL LIFE
Early humans depended on social life to
help them survive different challenges
SOCIETY
Is a derivation of the French word societe
which came from the Latin word societas
meaning ‘a friendly’ association with
others?
IMPORTANCE OF SOCIETIES
o Support for each other
o Formation of social groups
o Formation of a culture
o Regulation of policies and standards
o Achieving a common goal
7. USE OF LANGUAGE AND SYMBOLS
Early humans used pigments, paintings and
carvings that were stored in stones and
walls
HUMAN FLOURISHING AND THE GOOD
LIFE
In psychology, happiness is a mental or
emotional state of well-being
Positive or pleasant emotions ranging from
contentment to intense joy
To behaviorist, happiness is a cocktail of
emotions we experience when we do
something good or positive
Neurologists define happiness as the
experience of a flood of hormones released
in the brain as a reward for behavior that
prolongs survival
Hedonists view happiness as the polar
opposite of suffering; the presence of
happiness indicates the absence of pain
Aristotle ancient Greek philosopher known
for his natural philosophy, logic and political
theory
o contributions to logic, metaphysics,
mathematics, physics, biology,
botany, ethics, politics, agriculture,
medicine, dance and theatre.
o first to classify areas of human
knowledge into distinct disciplines
o founder of the Lyceum, the first
scientific institute, based in Athens,
Greece.
EUDAIMONIA
came from the Greek word eu meaning
“good” and daimon meaning “spirit”
refers to the good life marked by
happiness and excellence
flourishing life filled with meaningful
endeavors that empower the human
person to be the best version of
himself/herself.
PRINCIPLES OF HUMAN FLOURISHING
 Dignity of the human person
 Common good
 Preferential treatment for the
poor
 Subsidiarity
 Universal purpose of goods
 Stewardship of creation
 Promotion of peace
 Participation
  Global solidarity
DIFFERENT CONCEPTIONS OF HUMAN
FLOURISHING
EASTERN
o Focus is community-centric
o Individual should sacrifice himself
for the sake of society
o Chinese confusion system
o Japanese bushido
o Encourage study of literature,
science and art for a greater cause.
WESTERN
o More focused on the individual
o Human flourishing as an end
o Aristotlean view
o Aims for eudaimonia as the ultimate
good
HUMAN FLOURISHING (INDIVIDUAL,
COMMUNITY, SOCIETY)
 Environment
 Characters
 Habits
 Stories
 Parenting
 Brain development
HUMAN FLOURISHING
o Every discovery, innovation and
success contribute to our pool of
knowledge
o Human’s perpetual need to locate
himself in the world by finding
proofs to trace evolution
o Elicits our idea of self importance
o Technology is a human activity we
excel in as a result of achieving
science
o Good is inherently related to the
truth
WHAT IS A GOODLIFE?
- living in comfort and luxury with
few problems or worries
- characterized by happiness from
living and doing well
- State of being content with what
you have
ARISTOTLE’S VIEWS ON GOODLIFE
- Believed that good for humans is the
maximum realization of what was
unique to humans
- The good for humans was to reason
well
- The task of reason was to teach
humans how to act virtuously, and
the exercise faculties in accordance
with virtue
Virtue/s behavior showing high moral
standards.
o Goodness
o Virtuousness
o Righteousness
o Morality
o Ethicalness
o Uprightness
o Integrity
o Dignity
o Rectitude
 o Honesty It is all about thoughts, choices and actions!
o Honor
Life is good!
o incorruptibility
o Goodness Live it well!”
o Virtuousness ― Ernest Agyemang Yeboah
o Righteousness
o Morality
o Ethicalness WELL BEING THEORY
o Uprightness
o Integrity Human flourishing is not only focused on
o Dignity the happiness of individuals alone but also
in psychological well-being.
o Rectitude
o Honesty -Martin Seligman
o Honor
5 PILLARS OF HUMAN FLOURISHING
o incorruptibility
2 KINDS OF VIRTUE  POSITIVE EMOTIONS
1. Intellectual virtue - Requires - This includes pleasure, ecstasy,
experience and time warmth, comfort and other
2. Intellectual virtue - Requires emotions that contribute to the
experience and time “pleasant life”.
- pleasant life - refers to
NOTE:
feeling positive emotions in the
 S&T is also the movement towards most intuitive way, of feeling
good life. pleasant sensations.
 S&T are one of the highest  ENGAGEMENT
expressions of human faculties. - is characterized by flow.
 S&T allow us to thrive and flourish if - Flow refers to the experience of
we desire it. completely loosing oneself in an
 S&T may corrupt a person S&T with activity. Individuals become totally
virtue can help an individual to be absorbed in what they are doing and
out of danger lose track of time. They are not
thinking, but in essence unified with
Why is everyone in pursuit of a good life?
what they are doing.
“Life is good! - experiences which contribute to the
“engaged life”
The same good situation in life that makes
- Individuals could experience this in
one person feel so good to get into a bad
many activities, such as at work,
situation inspires another person to create
dancing, playing baseball, or even
another good situation because of the good solving a crossword puzzle.
situation.
- Being fully engaged means doing
everything with enthusiasm.
 RELATIONSHIPS
- The feeling of satisfaction,
flourishing or well-being can be
experienced when we are in a
relationship or with other people.
The last time you laugh out loud or
have that emotional joy, or great
feeling because of an
accomplishment, usually shared
with ‘other people’ is an example.
 MEANING
- A ‘meaningful life’ is based on man’s
value or worth. When one loses
someone very important, he/she
tends to see life meaningless. On the
other hand, if one feels needed and
important to someone else, he/she
wants to value life.
- In order to feel meaning, people
have to be engaged in something
that serves a goal beyond
themselves, such as in religion,
politics, or family.
 ACHIEVEMENT
- Defined as something that is
successful, or that is achieved after a
lot of work or efforts.
- The “achieving life” dedicated to
accomplishment for the sake of
accomplishment. It is often pursued
for its own sake, even when it brings
no positive emotion, no meaning,
and nothing in the way of positive
relationship.
- Any advancement in science and
technology should be assessed
according to the risks and costs they
bring to the society and
environment, which further affect
human flourishing.
When Technology and Humanity Cross
Technology started as human civilization
develop tools necessary for their survival . It
can be defined as the application of
scientific knowledge on different processes
that aids in making life easier.
Both advantage and disadvantages are
present despite the good intentions of
technological development.
Advantages and Disadvantages of Modern
Technology
ADVANTAGES
1. Improved communication, easy
access to information and social
networking
2. Improved communication, easy
access to information and social
networking
3. Improved communication, easy
access to information and social
networking
4. Improved communication, easy
access to information and social
networking
5. Improved communication, easy
access to information and social
networking
6. Improved communication, easy
access to information and social
networking
7. Improved communication, easy
access to information and social
networking
DISADVANTAGES
1. Job loss and human displacement
 -shift in economies to the use of As constant change occurs, the
technologies instead of human labor society today is very much different
as a main work force. with the society in the past.
-industries with high potential of Modern technology made a
automating their services includes difference in human lives, it brings
hotels, restaurants, wholesale and ease and comfort but also gives
retain trades, manufacturing, sale harm and discomfort when goes out
assistants, office clerks. of hand. And only man has the
2. World destruction weapons power to control and manage
- technology has further develop properly, the use of technology.
machineries and armaments that
caused massive death among
countries at war.
- this includes drones, fly-by-wire
technologies, submarine, various
missiles, aircrafts, space and
nuclear weapons
3. Dependence and Addiction
- Increased dependence on modern
tools and technologies that create
innovations and changes in the
society may reduce human creativity
and intelligence and worst addiction
to its use.
4. Physical-Social Isolation –absence
of interactive relationships between
family members and friends at the
individual level.
5. Costly /High maintenance cost
- expensive to develop and
maintain.
6. HEALTH RISK
 UNRELEASED CHECK – when the check was
drawn, it is assumed that journal entry for
payment is made.
POST DATED BALANCE – when the check
was drawn, it is assumed that the journal
entry for payment is made.
SUPPLIER’S DEBIT BALANCE – represents
accounts payable for each supplier.
Normal balance is credit
Can’t offset the liabilities to assets; no
minus
REVERSAL OF DISCOUNT – if the company is
using net method – purchases are added to
accounts payable net of discounts.
GOODS IN TRANSIT -

INTACC 2
ACCOUNTS PAYABLE
TRADE ACCOUNTS PAYABLE – liability
arising from purchase of inventory.
If the given balance is beginning balance –
use T-account
If the given is ending balance – apply the
adjustment to the given.
PURCOM