Describes how companies can expand through mergers or joint ventures.
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The 5 C's of Inorganic Growth
Costs, Competition, Channels of Distribution, Communication, Culture.
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Time Series Analysis
Examining data from the past in order to predict the future.
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3 Period Moving Average
When the mean of three periods of data is calculated for statistical purposes.
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Factors Affecting Sales Forecasting
Past performance, Current global conditions, Current industry conditions, Inflation, Internal changes, Marketing, Trends, Competitors actions.
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Limitations of Sales Forecasting
Only an estimate, Can be manipulated, More difficult to predict in the long term.
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Circumstances where sales forecasts are likely to be inaccurate
Start-up, Elastic Demand, Fashion, Significant changes in market share, Management has been poor in predictions previously.
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Investment Appraisal
How a business can evaluate an investment project to see if it is worthwhile.
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Payback
Considers the length of time to recover the initial cost of the investment.
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Average Rate of Return (ARR)
Measures the net return per year as a percentage of the initial investment costs.
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Net Present Value (NPV)
Discounts future cash flows (from interest rates) and then deducts the initial cost to look at how profitable the investment will be.
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Cost Benefit Analysis
Considers the private costs and benefits, as well as the external impact on society for large investments.
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Advantages of Payback
Simple, Useful for evaluating new technology, Good for current cash flow problems.
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Disadvantages of Payback
Ignores income after payback, Ignores profitability, Ignores the changing value of money.
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How to calculate Average Annual Profit for ARR
Add up all the cash inflows, Subtract initial cost, Divide this by the number of years of the investment to get average annual profit.
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Formula for ARR
Average Annual Profit/ Initial Capital Cost x 100
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Advantages of ARR
Show profitability, Can be compared to other uses for funds.
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Limitations of ARR
Ignores the changing value of money.
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Net Present Value Interpretation
Has to be positive to be a viable option- and the higher the number is, the more profitable.
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Earliest Start Time
How soon a task can begin.
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Latest Finish Time
The latest time that a task can finish.
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Critical Path
The sequence of tasks determining the minimum time needed for a project.
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Network Diagram
A chart showing the order of the tasks involved in completing a project.
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Total Float
The time by which a task can be delayed without affecting the project. Float= EST-Duration-LFT
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Decision Trees
Shows all possible outcomes of a decision with numerical values.
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Advantages of Decision Trees
May show previously unconsidered options, Placing numerical values on decisions make them easier to compare, Forces management to take all risks into account.
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Disadvantages of Decision Trees
Info based on probabilities, No qualitative data factored in, Time consuming, Data can be manipulated.
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Other cards in this set
Card 2
Front
Costs, Competition, Channels of Distribution, Communication, Culture.
Back
The 5 C's of Inorganic Growth
Card 3
Front
Examining data from the past in order to predict the future.
Back
Card 4
Front
When the mean of three periods of data is calculated for statistical purposes.
Back
Card 5
Front
Past performance, Current global conditions, Current industry conditions, Inflation, Internal changes, Marketing, Trends, Competitors actions.
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