Business AS Level

3.5.2 Analysing financial performance

How to construct and analyse budgets and cash flow forecasts:

• Budget- a limited amount of spending set by a business
• Cash flow forecast- an estimate for future cashflow based on extrapolations of the businesses financial history
• Variance analysis- the quantitative investigation of the difference between actual and planned behavior which is used to maintain control over a business.
• Favourable variance- making more than was forecasted
• Adverse variance- making less than was forecasted

Variance = budgeted figure - actual figure

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