FORECAST Function is generating negative values.

[Ehtisham Ali]

Hi All,

I have used a FORECAST function in my sheet but it is generating negative values.

I am confused about the relevance of negative values are they GOOD or BAD ?

Please do a forensic over this and let me understand it in detail.

I am attaching my workbook.

Your help and suggestions are warmly welcome.

 

[Velen]

Hi Ali,

You are having negative values, because you have an outlier for the month of Aug-15.

If you are looking for a rough estimate of the next 12 months, maybe you could take the average of Jun15 to May16 (excluding the outlier) and replace the value for Aug15.

The forecast function will use a linear approximation and will work better without the outlier (see the scatter plots)

One little thing, you are also incrementing your months by using =D2+31. Since not all months will have 31 days it is better to use =EDATE(Start_Date,1) - Analysis toolpack will have to be enable for this.

Hope this helps.

Cheers,
Velen

 

[Hui]

Negative Values can be both good or bad it depends on the issue

Negative Values are great if it refers to the cost of doing something, it has gone down and so a negative variance is great

A negative variance to your salary may not be seen by you as good?

Adding to what Velen mentioned above, you have to be very careful using forecast functions blindly
You need to understand what your data is doing and is the variance "as expected" is the Forecast within a "Normal operating range"

 

[Ehtisham Ali]

Thank you very much Velen for your explanation, it helped me a lot.

Also thank you Hui for your expert explanation about good or bad negative values.