what is an overcast 
an overcast is a type of forecasting error that occurs when an estimated metric such as future cash flows performance levels or production is forecast too high overcasting thus is when the estimated value turns out to be above the realized or actual value overcasting can be contrasted with undercasting which is when a forecast is made too low understanding overcastan overcast is caused by a variety of forecasting factors the main factor that results in overcasting is using the wrong inputs for example when estimating the net income of a company for next year one may overcast the amount if you underestimate costs or overestimate sales overcasting and undercastingan overcast or undercast is not realized until after the end of the estimated period although it can usually apply to the forecast of budget items such as sales and costs these errors are also found when estimating other items uncertainties and items that require estimates are areas where analysts and those building forecasts must use judgment the assumptions used can prove to be wrong or unforeseen circumstances may arise which leads to overcasting or undercasting overcasting could be indicative of aggressive estimates or aggressive accounting consistent overcasting should be investigated company employees could be overpromising to please upper management or the company might be hoping to keep current shareholders and might be trying to attract additional shareholders with aggressive forecasts an undercast is the opposite of an overcast in which a forecaster has underestimated a certain performance metric either due to incorrect inputs or unforeseen events example of overcastingif company abc expects to generate 10 million in sales for the year but ends up only bringing in 8 million an overcast of 2 million happened this could happen for a variety of reasons if during the budget building or forecasting process the company overestimates its average selling price for units with all else equal it can lead to an overcast as well if it overestimates the expected number of units sold this can lead to an overcast if the same company expects to generate 1 million in net income but generates 800 000 that s also an overcast the reasons for an overcast of net income can be plentiful they could include overestimating sales or underestimating costs such as employee expenses inventory purchases or marketing costs the idea of overcasting or undercasting can extend beyond company budgets to other forecasts such as the number of products or parts a plant can manufacture in a week if a plant forecasts it can create 13 000 parts in a week but it puts out 12 900 there was an overcast it can also apply to an investor s portfolio if an investor expects to collect 1 000 per year in dividends but due to a dividend cut they collect 750 a 250 dividend income overcast happened 