Linear Regression Analysis for Revenue Forecasting

What is the Year 14 Revenue Forecast?

What is the Trend Component?

What is the Constant?

Answer:

Linear regression analysis provides a powerful tool for forecasting revenue trends based on historical data. In this case, we are given the annual revenue data for a company over 12 years, with revenue measured in thousands of dollars. To prepare a forecast model, we first need to determine the Year 14 Revenue Forecast, the Trend Component, and the Constant.

Year 14 Revenue Forecast:

The Year 14 Revenue Forecast is $4,441.37 thousand. This value is obtained by plugging Year 14 into the equation of the regression line, which is Revenue = 400.167 + 240.109 x Year.

Trend Component:

The Trend Component is the slope of the regression line, representing the average increase in revenue per year. In this case, the Trend Component is $240.109 thousand per year.

Constant:

The Constant is the intercept of the regression line, indicating the estimated revenue when the Year equals zero. In this context, the Constant is $400.167 thousand. While the Constant is not directly meaningful for Year zero in this scenario, it helps in positioning the regression line to fit the data better.