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Business Flash Cards > 2.2 > Flashcards

2.2 Flashcards

1
Q

Definition of Sales forecast

A

Predication of achievable sales revenue based on data analysis trends , economic variables and competitor actions

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2
Q

Purpose of a sales forecast

A

To see if they will need to increase their productive capacity - produce more , buy more factory space , employ more workers

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3
Q

How can a sales forecast be produced

A

Market research - the accuracy of the data will impact on the quality of the forecast
Things they might look at - how many future sales they’ll make , effect of promotion on sales , changes in the size of the market , seasonal sales

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4
Q

Definition of time series analysis

A

The prediction of future sales based on past data

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5
Q

The four key components that a business will try to identify using time series data

A

The trend
Seasonal fluctuations
Cyclical fluctuations - impact of economy
Random fluctuations

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6
Q

How to calculate percentage change

A

Difference / Original x 100

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7
Q

Factors affecting sales forecasts

A

Consumer trends
Seasonal variations
Competition
Long term trends
Economic growth rate
Inflation rate
Unemployment levels
Interest rates
Exchange rates

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8
Q

Definition of Consumer trends

A

The Habits and behaviours of consumers around the products they buy and how they use them

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9
Q

Definition of Seasonal variations

A

How sales will vary across the seasons

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10
Q

Definition of economic growth

A

The increase in the total output of the economy measured by GDP

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11
Q

Definition of interest rates

A

Cost of borrowing or the benefits of saving

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12
Q

Definition of inflation

A

The sustained rise in the general price level over time

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13
Q

Definition of Exchange rates

A

The value of one currency in terms of another currency

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14
Q

Difficulties of sales forecasting

A

Historical data may not reflect future performance
Seasonality may affect sales
Natural disaster cannot be foreseen
Fluctuations in demand
A new business has no historical data to look at
Really hard to accurately predict the future

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15
Q

Definition of Costs

A

What a business has to pay in order to continue operating

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16
Q

Definition of Fixed Costs

A

Costs that don’t change with output

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17
Q

Definition of Variable costs

A

Costs that change with output

18
Q

How to calculate total costs

A

Fixed costs + variable costs

19
Q

How to calculate variable costs

A

Variable cost per unit x quantity produced
Total costs - fixed costs

20
Q

How to calculate profit

A

Total revenue - total costs

21
Q

How to calculate average cost per unit

A

Total cost / output

22
Q

How to calculate revenue

A

Price x quantity sold

23
Q

Definition of revenue / sales value

A

The amount of money earned by selling a product

24
Q

Definition of sales volume

A

The number of units sold

25
Q

How can revenue be increased

A

Increase price
Increase quantity

26
Q

Definition of Loss

A

Total costs are greater than total revenue

27
Q

Definition of Break even e

A

Total costs are equal to total revenue

28
Q

Definition of Profit

A

Total costs are less than total revenue

29
Q

How to calculate Break even

A

Fixed costs / sales price - variable costs

30
Q

Definition of Margin of safety

A

Difference between actual output and break even

31
Q

Definition of Budget

A

A financial plan that is agreed in advance
It shows how much money is needed and where it will come from

32
Q

Purpose of budgets

A

Control and monitoring
Planning
Co-ordination
Communication
Efficiency
Motivation

33
Q

Types of budgets

A

Sales volume - planned sales level
Sales revenue - uses sales volume budget and prices to show planned revenue
Production costs - based on sales volume budget and all planned production costs
Overheads - all planned indirect costs
Total costs - all planned business costs
Marketing - planned spending on research , advertising and promotion
R and D - planned spending on research and development
Profit - planned revenue , costs and profit
Cash - planned inflows and outflows and cash balances
Master - a summary of all budgets

34
Q

Definition of Historical budget

A

Budget based off of past data

35
Q

Definition of Zero based budget

A

A budget set using figures based on potential performance and no previous data to base it off

36
Q

Cons of historical budgets

A

Businesses are dynamic
Incremental budgeting could occur which can lead to inefficiencies and missed opportunities for cost savings

37
Q

Pros and cons of zero based budget

A

Pros :
Improves allocation for resources
A questioning attitude is developed which will help reduce unnecessary costs and eliminate inefficient practices
Staff motivation could be increase due to the practise of evaluation skills and a greater knowledge of operations might develop
Encourages managers to look for alternatives
Cons :
Time consuming
Skilful decision making is required and decisions may be influenced by subjective opinions
Requires the bidding manager to have good negotiation skills
It threatens the status quo
Managers may not be prepared to justify spending on certain costs

38
Q

What is a Favourable variance

A

Spent less then expected - costs lower then budgeted
More income then budgeted

39
Q

What is adverse variance

A

Spending more then budgeted - costs higher then budgeted
Income is lower then budgeted

40
Q

Reasons for favourable variance

A

Ability to charge higher prices
An increase in demand
Improvements in the quality of the product
Increase in consumer incomes
A change in consumer’s tastes

41
Q

Reasons for adverse variances

A

Costs higher due to production being higher
Supplier raise prices
Some inefficiencies in production
Higher wages due to wage demands

42
Q

Difficulties in setting budgets

A

They’re planned figures - inaccurate due to human error and based on historical figures
One of the most significant data is sales data - if this is inaccurate most budget figures will be inaccurate
May lead to conflict between departments
Time - could of been used completing other tasks
Budget can be too ambitious - so no longer a bench mark
Budgets could be too small - so no longer a bench mark
Motivation of workers
Manipulation - some managers might have greater influence on coordinating and setting budget
Rigidity - can sometimes constrain business activities
Short termism - some managers could be too focused on the budget and take actions that undermine the future performance of the business

Business Flash Cards (19 decks)

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