2.2 Financial Planning Flashcards
Sales forecasting
predicting future sales
What is extrapolation?
Making predictions around trend
What is moving averages?
Smoothing out fluctuations in data
What 3 ways do you find sales forecasting?
Correlation
Extrapolation
Moving Averages
Total costs
Fixed costs + Variable costs
What is contribution per unit?
How much you make from selling a good before paying off fixed costs
Contribution per unit calculation
Selling price - variable cost per unit = contribution per unit
How to find break even level of output
Fixed costs / Contribution per unit = Break even output
What is the margin of safety?
The difference between actual sales and break even level of output
(actual output - break even output = Margin of safety)
What are the 3 different budgets for businesses?
Revenue budgets
Cost budgets
Profit budget
Benefit of using budgets
Costs allocated effectively throughout business
What is historical budgeting?
Setting budgets based on previous data
What is Zero based budgeting?
Making budgets from scratch
What is variance analysis
comparing actual results to budgets
