Financial Planning

Created by: JoeBall11
Created on: 02-01-21 20:31

2.2.1 Sales Forecasting
What is sales forecasting?
What are 2 types of info can a business use to carry out sales forecasting?

SF = business range of techniques to predict future sales volume
1. Market Research
2. Back data (e.g. time series analysis)

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2.2.1 Sales Forecasting
What factors affect sales forecasts?

1. Economic Variables (Inflation, interest rates, unemployment, exchange rates, economic growth)
2. Consumer Trends (seasonal variations, fashions, long term trends)
3. Actions of competitors

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2.2.1 Sales Forecasting
What are the limitations of sales forecasting?

1. assume future will be like past
2. rapid changing markets can be unpredictable
3. data used by businesses can vary considerably

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2.2.2 Sales Rev & Cost
What are 2 ways to measure sales?
what is the sales revenue equation?

1. sales volume
2. sales revenue

SALES PRICE X SALES VOLUME = SALES REVENUE

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2.2.2 Sales Rev & Cost
What are the 2 main criteria that measure business success?

1. Revenue (shows the product is desirable to customers)
2. Profit (turns revenue in to profit)

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2.2.2 Sales Rev & Cost
What is the equation for;
1. average cost
2. profit

AVERAGE COST (UNIT COST) =
TOTAL COST / OUTPUT

PROFIT = TOTAL REVENUE - TOTAL COST

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2.2.3 Break even
What are the 4 uses of break even analysis

1. decide if business if PROFITABLE
2. determine level OUTPUT needed for profit
3. assess changes in level of OUTPUT / PRODUCTION
4. assess effects of PRICES and cost

If you don't break even you are in the POOP!

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2.2.3 break even equations

1. break even point
2. contribution
3. total contribution

1. FIXED COSTS/CONT PER UNIT

2. SELLING PRICE - VAR COST

3. TOTAL OUTPUT X CONTRIBUTION PER UNIT

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2.2.3 break even
what is the margin of safety?
what does size of margin of safety determine?

margin of safety = current level of output - break even output

The level of risk shown to the business

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2.2.3 break even
What are 2 benefits of BE analysis?
What are 2 limitations?

+ Simple, easy to use
+ Useful guideline for decisions

- focus on output when business may not sell all output
- costs are rarely constant

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Other cards in this set

Card 2

Front

2.2.1 Sales Forecasting
What factors affect sales forecasts?

Back

1. Economic Variables (Inflation, interest rates, unemployment, exchange rates, economic growth)
2. Consumer Trends (seasonal variations, fashions, long term trends)
3. Actions of competitors

Card 3

Front

2.2.1 Sales Forecasting
What are the limitations of sales forecasting?

Back

Card 4

Front

2.2.2 Sales Rev & Cost
What are 2 ways to measure sales?
what is the sales revenue equation?

Back

Card 5

Front

2.2.2 Sales Rev & Cost
What are the 2 main criteria that measure business success?

Back

View more cards

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