financial planning

Question 1

sales forecast is

Answer 1

prediction of sales revenue from historical numbers of sales and current market research

Question 2

budget is

Answer 2

an estimate of income and expenditure for a business covering a set period of time

Question 3

sales forecast Is good for 3 things

Answer 3

allows to plan how many staff are needed
create a budget
allows to create a cash flow and profit forecast

Question 4

3 factors affecting sales forecast

Answer 4

consumer trends
economic variables
actions of competitors

Question 5

sales revenue formula

Answer 5

selling price x sakes volume

Question 6

sales volume formula

Answer 6

sales revenue / selling price

Question 7

variable costs are

Answer 7

those that change in proportion to the amount of output e.g. raw materials

Question 8

breakeven is

Answer 8

the point at which a business does not make a profit or loss

Question 9

breakeven analysis is

Answer 9

the study of revenues and costs of a business to see how long it will take to get to the desired level of output

Question 10

contribution is

Answer 10

looking at the amount left over on each product sold

shows how many products need to be sold to cover fixed operating costs

Question 11

contribution formula is

Answer 11

selling price - variable costs per unit

Question 12

break even is

Answer 12

fixed costs / selling price - variable costs

Question 13

margin of safety is

Answer 13

the difference between actual level of output and the break even output

Question 14

Margin of safety formula is

Answer 14

current output(sales) - breakeven point

Question 15

3 limitations of break even

Answer 15

based on realistic assumptions
selling price vary
fixed and variable costs will change

Question 16

3 purposes of budgets

Answer 16

helps establish priorities
helps motivate and delegate staff
help meet financial objectives

Question 17

2 types of budget

Answer 17

historical budget

zero based budget

Question 18

historical budget is

Answer 18

using previous budget

Question 19

zero based budget is

Answer 19

base budget on new proposals for sales and costs

no account of previous sales

Question 20

variance analysis is

Answer 20

difference between budget figures and actual figures
favourable - above expected profits
adverse - lower than expected profits

Question 21

4 difficulties of budgeting

Answer 21

time consuming
circumstances change
can be easy to make an unrealistic budget
smaller budget = demotivated staff