Question

1. What are the main differences between Model-Based and Historical data for financial targets ......

2. Are financial incentives more effective then non-financial ones? Examples?

Answer 1

Answer to first question.

1. Historical data is used for forecasting the target for future while in Model-based forecasting the statistical predictive modeling is adopted to determine the financial targets. Financial models are based on the act of taking the forecast assumption and numbers published in financial reports.

Model based financial targets can be revised based on the re-training of the model which was deployed. Finacial models build a predictive model based on the forecasted value and helps in sound decision making.

Financial model based forecasting gives a better target which are more achievable and error free and we can consider many internal as well as external factors and their impacted can be included.

While historical data does not give a good picture of future outlook.