2.2 Financial planning

Question 1

define ‘sales forecast’ and what is their purpose?

Answer 1

Sales forecast is predicting future revenue, based on past sales figures
-this can aid the validity of cash-flow forecasts
-helpful to determine resources required
-supports planning

Question 2

Factors affecting sales forecast

Answer 2

-consumer trends, e.g. changes in fashion, seasonal trends and long term trends
-economic trends, e.g. inflation, interest rates, exchange rates, economics growth and unemployment
-actions of competitors e.g. sales forecast should consider both short and long term actions of competitors (sales promotions and changing their product range)

Question 3

What are the difficulties of sales forecast

Answer 3

-lack of experienced/specialised individual may result in decreased reliability
-there is a significant amount of data to consider

Question 4

Calculation for sales revenue

Answer 4

Sales Revenue = selling price x number of units sold

Question 5

Explain fixed costs (FC), variable cost (VC) and total cost(TC)

Answer 5

fixed costs - cost that do not change e.g. rent and insurance
variable costs - costs that do change depending on output
total costs - FC+VC

Question 6

calculation for contribution

Answer 6

contribution = selling price - variable costs