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Business Studies > Finance Planning > Flashcards

Finance Planning Flashcards

1
Q

What is a sales forecast?

A

Estimates the volume or value of future sales using market research or past sales data

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2
Q

What are the 5 purposes for sales forecasts?

A
  • Avoid cash flow problem
  • frees up management time
  • production capacity
  • employ more workers
  • start promotional activity
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3
Q

What is sales volume?

A

The quantity of products sold

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4
Q

What is sales revenue?

A

The amount of money made from selling a product - quantity x price

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5
Q

What is the selling price?

A

How much the price of an item

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6
Q

What are fixed cost?

A

Costs that do not vary with the level of output eg. Rent

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7
Q

What is a budget?

A

an estimate of income or expenditure for a set period of time

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8
Q

What are the 4 main purposes of budgeting?

A
  1. Planning
  2. Forecasting
  3. Communication
  4. Motivation
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9
Q

How does a sales forecast allow a business to avoid cash flow problems?

A

Helps manage production, staff and financing needs more effectively and possibly avoid unforeseen cash flow problems

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10
Q

How does a sales forecast free up management time?

A

Allows the business owners to spend more time developing their business rather than responding to day to day developments in sales and marketing

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11
Q

How does a sales forecast help production capacity?

A

to estimate if they need to increase or decrease production – and this will also help them to see if they have enough production capacity to deal with expected demand

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12
Q

What is the purpose of a sales forecast in terms of employing more workers?

A

Allows the business to see increases in sales which could mean they need more workers to meet demand.

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13
Q

How does consumer trends affect sales forecast?

A

Understanding upcoming trends can allow businesses to capitalise on increase in sales.

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14
Q

What Economic Variables affect sales forecast?

A

interest rates, inflation, unemployment rate and GDP can all affect how a business plans its sales forecasts

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15
Q

How does actions of competitors affect sales forecast?

A

If the business has products that face declining sales, perhaps because of a competitor’s superior product, they may decide to produce or sell less of those products

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16
Q

What are the difficulties of sales forecast?

A
  • No guarantees
  • Dynamic market
  • short term thinking
17
Q

What is variable cost?

A

The amount a product is brought from the wholesaler

18
Q

What does break-even mean?

A

the point at which Total Revenue equals Total Costs so the business is making neither a profit nor a loss

19
Q

What is contribution?

A

the amount that each unit produced ‘contributes’ towards the fixed costs of the business

20
Q

What are the uses of break even?

A
  • used by businesses to know when they will stop making a loss
  • used by business to write Thor business plan
21
Q

What is the contribution formula?

A

Contribution = selling price - variable cost

22
Q

What is the Full break even formula?

A

Fixed cost/Contribution

23
Q

What is the Margin of safety?

A

The difference between the break even point and the current sales

24
Q

What is the formula for margin of safety?

A

Actual sales - break even level of sales

25
Q

What are the limitations of break even?

A
  • Assumes everything that’s made is sold
  • Only as accurate as the data they’re based on
26
Q

What is a budget?

A

An estimate of income or expenditure for a set period of time

27
Q

What are the purposes of budgets?

A
  • Planning
  • Forecasting
  • Communication
  • Motivation
28
Q

What is a historical budget?

A

Using past financial performances to base a budget

29
Q

What is a zero based budget?

A

Created by using figures based on potential performances

30
Q

What are the difficulties of budgeting?

A
  • inflexible so bad for dynamic businesses
  • Tendency for managers to spend up to the limit

Business Studies (16 decks)

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