Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business Theme 2 > 2.2 financial planning > Flashcards

2.2 financial planning Flashcards

1
Q

What is a sales forecast?

A

Predicting future sales volume/sales revenue based on past sales data/market research

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the purpose of a sales forecast?

A

Marketing budgets - identify when promotional activity is needed

Finance - inform cash flow forecasts

Production planning

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What factors affect sales forecast?

A

Consumer trends

Economic variables

Actions of competitors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How can consumer trends affect sales forecast?

A

Demographics

Affluence

Gloabalisation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How can economic variables affect sales forecast?

A

Value of the pound

Changes with taxation

Inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How can actions of competitors affect sales forecast?

A

Changing price

Launching new products

Promotional campaigns

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What were the difficulties of sales forecasting?

A

Hard to predict

Seasonality may affect sales

Natural disasters cannot be foreseen

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the formula for sales revenue?

A

Sales volume x selling price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the formula for sales volume?

A

Sales revenue x selling price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are fixed costs?

A

Costs that don’t change as output changes

Have to be paid even when a business isn’t producing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Examples of fixed costs;

A

Rent

Interest charges

Tax

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are variable costs?

A

Costs that change in direct proportion to the level of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Examples of variable costs:

A

Raw materials

Fuel costs

Packaging

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the formula for total variable costs?

A

Variable cost per unit x no. of units produced

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are total costs?

A

Shown when fixed costs and variable costs are added together

Figure that is deducted from sales revenue to calculate profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is breakeven?

A

The point at which revenue equals cost so your business is making neither a profit or a loss

17
Q

How to calculate breakeven?

A

Fixed costs

Contribution

18
Q

What is contribution?

A

Difference between selling price and variable costs

19
Q

What is margin of safety?

A

The horizontal distance between the actual output of a business and it’s breakeven output

20
Q

Strengths of break even analysis:

A

Viability

Provides a target

Helps secure finance

Aids decision making

Can calculate the level of profit/loss at different levels

Can predict the outcome of changing variables

21
Q

Weaknesses of break even analysis

A

Assumes that every item produced is sold

Prices may differ

Costs may increase

Prediction so it may be bias

Presuming only one item is being sold

22
Q

What is a budget?

A

A target for revenue or costs for a future time period

23
Q

What can budgets be used for?

A

Income

Expenditure

Profit

24
Q

What is the purpose of a budget?

A

Planning

Motivations

Decisions

Control

25
Q

What is a historical budget?

A

A budget set for the business using current financial figures

26
Q

Pros of historical budgeting:

A

Realistic that it is based on last years sales

27
Q

Cons of historical budgeting:

A

Business is dynamic so the figures may be wrong

28
Q

What is zero based budgeting?

A

A budget set for a business by using figures based on potential performance

29
Q

Pros of zero based budgeting:

A

Can prevent wastage that occurs if all budgets creep upwards year after year under a system of historical budgeting

30
Q

Cons of zero based budgeting:

A

Time consuming

31
Q

What is a variance analysis?

A

Involves looking back to calculate the difference between a budgeted figure and the actual figure that occurred

32
Q

What does it mean if the variance is favourable?

A

The actual figure was better for the business than the budgeted figure meaning…

Expenditure lower than budget

Income higher than budget

Profit higher than budget

33
Q

What does it mean if the business is adverse?

A

The actual figure was worse than the budgeted figure meaning…

Expenditure higher than budget

Income lower than budget

Profit lower than budget

34
Q

How to respond to variances:

A

Change budgets

Staff training

Reward staff

Change suppliers

New marketing tactics

Review product portfolio

35
Q

What are the difficulties of budgeting?

A

Inflexibility

Time consuming

Unrealistic budgets can be demotivating

Businesses can be budget driven rather than customer driven

May not account for external shocks e.g weather on farming

Business Theme 2 (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions