Undercast

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DEFINITION of '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.

INVESTOPEDIA EXPLAINS 'Undercast'

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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