financial planning Flashcards
sale forecasting definition
predict future salves volume and revenue based on past sales data
what does sales forecasting help with
help businesses make decisions
helps firm to know when they may need more finance to prevent running out of cash
helps make sure firm has all the resources it needs so can meet the predicted demand
what factors affect sales forecasting
consumer trends-some products fairly predictable e.g. Christmas trees with rise in demand and sales in winter
may be uncertain e.g. demand for butter
economic variables-how much money they have depends on how much willing to buy so increase in sales
actions of competitors-e.g. business reduces their prices then sales for your business are reduced
what type of markets are hard to make a sales forecast about
dynamic markets as sales constantly changing
sales volume definition
number of units sold in a given time period
sales revenue definition
values of sales in a given time period
what is the formula for sales revenue
sales revenue=selling price x sales volume
definition of fixed costs and example
dont change with output
e.g rent on factory, basic salaries, cost of new machinery
variables costs definition and example
rise and fall as output changes
e.g. hourly wages, raw material costs, packaging cists
formula for variable costs
average variable cost x quantity produced
formula for total costs
fixed costs + variable costs
profit formula
total revenue-total costs
if total revenue greater=business makes profit
if total costs is greater=business makes a loss
break even point definition
level of sales business needs to cover its total costs
at break even point total fixed costs +total variable costs=total revenue
relationship between sales and break even point (profit or loss)
sales below break even point=business makes loss
if break even point above sales+business makes profit
what does a break even analysis do
tells business how much they need to sell to break even
