3.3 Flashcards
Sales forecasting definition
a prediction of the sales volume and sales value a business will make
Time series analysis definition
a method of analysing data by collecting the information over specific intervals of time
How to calculate a three year moving average
add 3 years together then devide them by 3
How to calculate a 4 year moving average
add 4 years together and then do this for the next set of numbers then add the those together to get the 8 year moving average then devide that by 8
Ways to improve sales forecast
create forecast for a short period of time
Revise them frequently
Use market research data
Use experts
Investment definition
The purchase of capital goods or expenditure that is likely to yield a return in the future
Investment appraisal definition
How a business oblectively evalutates an investment decision in order to establish it it will be profitable
How to calculate payback period
( remainder / income that year ) x 12
Pros and cons of payback period
Pros:
Easy to calculate
Focuses on cash flow and speed of return
Quick
Cons:
Ignores value of money overtime
Encourage short term thinking
Won’t help if project have the same payback period
Average rate of return formula
Average annual profit / cost of investment ) x 100
Pros and cons of average rate of return
Pros:
shows profitability of project
allows a range of projects to be compared
the rate can be compared to other uses of the investment fund
Cons:
value of money over time ignored
profit figures based on forecasts
Net present value definition
The present value of future income from an investment project
How to calculate discounted cash flow
Add all the values that have been affected by the value of money over time then take away the inital cost from that total
How to calculate the float
Lowest finish time - activty duration - earlist start time
If a float calculate is 0 what does this mean
this activity cannot be delayed without delaying the whole project
