Question 1

What is consumer income?

Accepted Answer

the amount of income remaining after taxes and expenses have been deducted from wages

Question 2

What are consumer trends?

Accepted Answer

the habits and behaviors of consumers that determines the goods and services the y buy

Question 3

What are economic growth?

Accepted Answer

the rise in output of an economy as measured by growth in Gross Domestic Product (GPD) usually as a percentage

Question 4

What is economic variables?

Accepted Answer

measures within the economy which have effect on businesses and consumers, Examples include unemployment inflation and exchanges rates

Question 5

What is Extrapolation?

Accepted Answer

forecasting future trends based on past data

Question 6

What is forecasting?

Accepted Answer

a business process assessing the probable outcome using assumptions about the future

Question 7

what is sale forecast?

Accepted Answer

projection of future sales revenue, often based on previous sales data

Question 8

What is time series data?

Accepted Answer

a method that allows a business to predict future levels from past figures

Question 9

What is the purpose of sales forecasts?

Accepted Answer

- How much stock to purchase? - How many staff to employ? - How much finance is required? - What marketing strategy?

Question 10

What is time series analysis?

Accepted Answer

this is a forecasting technique which uses historic data to predict future sales forecasts

Question 11

what are different ways of time series analysis?

Accepted Answer

- trend - seasonal fluctuation - cycle fluctuation - random fluctuation

Question 12

how can trends be used as a method of analysis?

Accepted Answer

raw data shows patterns of sales figures, this allows trends to be identified

Question 13

how can seasonal fluctuation be used as a method of analysis?

Accepted Answer

most business are unlikely to maintain constant leads of sales over a 12 month period

Question 14

how can cycle fluctuation be used as a method of analysis?

Accepted Answer

performance of a business based on the position of the economy in the business cycle

Question 15

how can random fluctuation be used as a method of analysis?

Accepted Answer

freak figures that stand out from the trend, usually influenced by external factors

Question 16

What is important to remember about time series analysis?

Accepted Answer

- time series analysis does not attempt to explain data it is solely looking at the data to inform prediction - further investigation may be required to identify the factors behind the result

Question 17

How can you calculate sales adjustments?

Accepted Answer

Change on sales/original x 100

Question 18

What are the benefits of sales forecasting?

Accepted Answer

- informs cash-flow forecasts - plan for deliveries of supplies - ensures correct staffing levels - ensure that business can identify any capacity issues

Question 19

What factors affect sales forecasting?

Accepted Answer

- consumer trends - economic variables - action of competitors

Question 20

How do consumer trends affect sales forecasting?

Accepted Answer

business need to satisfy their customers' needs and desires the ones who are the most successful at doing this are the ones who can anticipate changes in consumer trends, either by identifying them or influencing them

Question 21

What are the factors under the consumer trends?

Accepted Answer

- seasonal variation - fashion - long term trends

Question 22

How does Seasonal Variation affect sales forecasting?

Accepted Answer

- certain industries are seasonal in nature and its important that businesses account for that in their planning - The obvious ones are holiday resorts, Christmas tree and ice cream sales - However, utility companies, such as gas ad electric also have season variation in their usage - Its important that businesses that see high levels of seasonal demand account for this to ensure that any spending on either capital or revenue expenditure dont impact negative on the businesses cash-flow

Question 23

How does fashion affect sales forecasting?

Accepted Answer

- consumer preference and tastes can vary widely and quickly interpreting and anticipating fashion choices is a difficult and unpredictable business - fashion and technology are 2 sectors hit hard by this uncertainty and as such, it makes accurate sales forecasting very difficult

Question 24

How does long term trends affect sales forecasting?

Accepted Answer

- whilst some trend change quickly, other charge over time - from Black & White TVs and leaded petrol engine cars to Smart devices that allow you to surf the internet there are longer term developments in consumer trends - as technology develops slowly, so do our expectation of services, from tape recorders and blockbusters to streamed films as you want them, its taken years for these developments to materialize - environmental considerations also impact on consumer views as they currently strive to 'protect the planet'

Question 25

How does economic variables affect sales forecasting?

Accepted Answer

- charges in the wider economy will have a great impact on the businesses ability to accurately forecast. - they economy in this respect refers to consumers (households), businesses and government - Perception on future performance will have a big impact on sales predictions

Question 26

What are difference factors under economic variables?

Accepted Answer

- economic growth - interest rates - inflation - unemployment - exchanges rates

Question 27

How does economic growth affect sales forecasting?

Accepted Answer

- economic growth is measured by the relative increase in GDP of an economy. it can affect forecasts in the following wages - if GDP grows at a rate which is in line with, or better then anticipated, this can be seen as positive and an lead to an increase in business sales as confidence is high - if GDP growth slows ,this can be an indicator towards future issues, which can lead to reduced confidence and reduced consumer spending on non-essential items

Question 28

How does a rise in interest rates affect sales forecasting?

Accepted Answer

- the cost of borrowing increases due to larger interest payments, this reduces people willingness to take loans to purchases larger items - customers have more intensive to save as they receive more interest, more saving reduced spending

Question 29

How does a fall in interest rates affect sales forecasting?

Accepted Answer

- as less interest is paid, the cost of borrowing larger amounts of money is reduced, infrastructure and larger household purchases - As rewards for saving are less, there's little incentive to do so consumers may spend cash instead

Question 30

How does inflation affect sales forecasting?

Accepted Answer

- inflation measures the general rise in the increase in price over time - increases in price must be matched to similar wages rises, otherwise the purchasing power of the consumers income is reduced. Over the long term, high inflation will reduce customer spending - This would usually lead to reduced sales forecasts

Question 31

How does unemployment affect sales forecasting?

Accepted Answer

- unemployment measures the number of people who are out of work but actively seeking employment - if unemployment is low, this means that businesses feel confident about the strength of the economy as consumers feel secure in their jobs, with less need to save - However, if unemployment is high, that these out of work will be living off reduced incomes, meaning they have less disposable income, this will lead to a reduction in spending on all but non-essential items, this would lead to reduced sales forecasts

Question 32

How does exchange rates affect sales forecasting?

Accepted Answer

-the exchange rates between one currency and anther reflects the relative value of those currencies and their purchasing power in the other -Exchange rates only affect a business if they either purchase products or material from overseas, or they sell to those markets -If the value of the pound falls relative to another currency, then it becomes cheaper for customers from overseas to buy UK manufactured products, in this scenario, companies would increase their sales forecast - if the value of the pound rises, then the goods sold overseas increases in prices , this would usually see a reduction in sales forecasts

Question 33

how does action of competitors affect sales forecasting?

Accepted Answer

the action of competitors has a major impact on many areas, from innovation to pricing and promotion. Sales forecasting is an area which can be greatly affected by the action of competitors

Question 34

What issues will businesses have to consider when considering the actions of competitors?

Accepted Answer

- New players moving into markets - Rivals new products - Internal development - business relocating to/from your area - web based sales - acquisition and merger (joining of businesses)

Question 35

What are the difficulties of sales forecasting?

Accepted Answer

-volatile consumer tastes can lead to misinterpretation of sales figures, using data only to inform forecasting can lead to wrong decisions being made

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2.2 Financial Planning Flashcards

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