PROJECT 06Intermediate
Linear Prediction of Monthly Revenue
Business scenario
Finance needs a quick, explainable projection of monthly revenue for the next six months to sanity-check the budget.
Problem statement
Fit a linear trend (with and without seasonality) to 2023–2025 monthly revenue, evaluate it on held-out months and project 2026 H1.
Learning objectives
- Fit and interpret a linear trend
- Add seasonal dummies and compare fit
- Evaluate with a time-based holdout and explain uncertainty
Instructions
Use pnl_monthly Revenue actuals. Train on 2023-01…2025-06, test on 2025-07…2025-12. Report MAE and MAPE on the test months. Then refit on all data and project Jan–Jun 2026.
Tasks
- Trend-only model: slope interpretation in currency per month.
- Trend + month dummies model.
- Holdout evaluation of both; compare with a seasonal naive baseline (same month last year × growth).
- 2026 H1 projection with a simple error band (± test MAE).
- Explain when this linear approach would fail.
Deliverables
- Notebook or workbook
- Chart of fit and projection
- Half-page explanation
Evaluation rubric
| Criterion | Weight | Excellent | Proficient | Developing | Insufficient |
|---|---|---|---|---|---|
| Model fitting | 25% | Both models correct, coefficients interpreted. | Correct and complete with minor gaps in rigour or presentation. | Partly correct; important steps missing, unvalidated or unclear. | Missing, incorrect, or not supported by the data. |
| Evaluation | 25% | Proper time-based holdout and baseline comparison. | Correct and complete with minor gaps in rigour or presentation. | Partly correct; important steps missing, unvalidated or unclear. | Missing, incorrect, or not supported by the data. |
| Projection & uncertainty | 15% | Projection with honest error band. | Correct and complete with minor gaps in rigour or presentation. | Partly correct; important steps missing, unvalidated or unclear. | Missing, incorrect, or not supported by the data. |
| Interpretation & recommendations | 25% | Clear, quantified conclusions tied to the business question, with limitations stated. | Correct and complete with minor gaps in rigour or presentation. | Partly correct; important steps missing, unvalidated or unclear. | Missing, incorrect, or not supported by the data. |
| Presentation | 10% | Clear charts. | Correct and complete with minor gaps in rigour or presentation. | Partly correct; important steps missing, unvalidated or unclear. | Missing, incorrect, or not supported by the data. |