3.3.1? Sales Forecasting

Question 1

What is a moving average

Answer 1

Moving average is where the mean average in a set of data is continuously recalculated over time to establish a trend in the data

Question 2

Seasonal variations

Answer 2

 regular changes in demand at different times of the year, for example Christmas

Question 3

Cyclical variations

Answer 3

Linked to the business cycle in the country’s economy for example with a recession

Question 4

Random variations

Answer 4

Unpredictable changes that may occur at any time and will cause unusual sales figures for example exceptionally poor weather or negative public image following a high-profile product failure

Question 5

 what does calculating moving averages help with

Answer 5

Calculating moving averages helps move out fluctuations from sales data by mapping trends over several years.
It is then possible to extrapolate – extend the trend line to predict future sales

Question 6

The benefits of sales forecasting

Answer 6

Improved working capital and cash flow, Increased efficiency and stock control, better workforce planning, improved budgeting, forecast costs and profits

Question 7

Improved working capital and cash flow

Answer 7

By taking into consideration cyclical and seasonal variation factors, financial managers can better plan to improve the liquidity position of a business

Question 8

Improved efficiency and stock control

Answer 8

Sales forecasting greatly assists the production department in knowing the number of goods to produce and in planning for the amount of stock required in the future

Question 9

Better workforce planning

Answer 9

Accurate sales forecasting can help the human resources department in Succession planning regarding the number of staff required in the future

Question 10

Limitations of sales forecasting

Answer 10

Uncertain future demand and inaccuracy of predictions since the business environment is constantly changing, change in costs effect in price- for example if the cost changes this most likely impact price which will affect sales forecasts, complex moving average calculations which are difficult and time-consuming, external influences mean unpredictable

Question 11

How to calculate the variation

Answer 11

Actual sales minus trend (which is the 3-year moving average)

Question 12

Seasonal variation formula

Answer 12

Actual sales revenue minus quarterly moving average

Question 13

What else does the moving average require you to do

Answer 13

Plot on a graph and work out the variation

Question 14

Average variation

Answer 14

Actual - average then find mean

Question 15

What is four quarter moving average better for

Answer 15

Firms with products that sell better at different times for example seasons

Question 16

 extrapolation

Answer 16

Line of best fit one calculate variation to calculate average variation