2.2 Financial planning

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Sales Forecasting

sales forecasting- estimating future sales or costs accuratley


  • allows managers to look ahead and repare the business for whats ahead
  • drives many other plans such as their cash flow forecast 

factors affecting sales forecasts 

  • consumer trends- such as changing tastes and demographics
  • economic variables- such as taxation and inflation
  • action of competitiors
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Sales, Revenue and Costs


Can be measured in 2 ways-

  • sales volume (no. Sold)
  • sales revenue (volume x price)


Ways to boost revenue include:

  • selling more
  • lowering the price
  • change price with demand


Fixed- don’t change with output

Variable- change with output


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The break-even point is how many sales need to be made to cover costs 

total costs= total revenue

BEP= total fixed cots/ contribution per unit

CPU= price per product- variable cost per unit 

chnages in a BE chart

  • price rise- revenue line steepens lowers BE point
  • rise in VC-increases BE point
  • fall in FC- lowers BE point


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Budget- An estimate of costsrevenues, and resources over a specified period, reflecting a reading of future financial conditions and goals

Budget holders

   Directors- regional managers- branch manager- section managers- shop floor workers

Constructing a budget 

   Make a judgment of sales revenue

   Set cost ceiling 

   Break down costs by division or department 

Types of budget

   Historical- set it based roughly on the previous years 

  • Zero-based- all departments have a budget of 0 and have to ask for any funding they need. 
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