What is ‘Undercast’
A forecasting error that occurs when estimating items such as future cash flows, performance levels or production. Undercasting produces an estimation that is below the realized value.
There are a number of factors that may lead to undercasting values. The primary reason for undercasting involves using the wrong inputs. For example, when estimating the net income of a company for next year, you may undercast the amount if you overestimate costs or underestimate sales. You may have expected sales to be $5 million and costs to be $3 million. This forecasts a net income of $2 million. If actual net income was $2.5 million, you would have undercast the income by $500,000.
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