Financial Planning/ Cash Budgets - Lecture 6b

Question 1

What is financial planning?

Answer 1

the forecasting of cash received and cash payable, of
incomes and revenues, and of the resulting state of financial health.

Question 2

What is scenario analysis

Answer 2

Looking at best / worst case
scenarios

Question 3

What is sensitivity analysis?

Answer 3

Analysing the effects of changes in one variable

Question 4

What is the planning cycle?

Answer 4

The planning cycle shows that forecasting and budgeting should be a continuous process. The business plan should be considered the first of a series of ‘rolling’ budgets

Question 5

Uses of financial planning and cash budgets - internal

Answer 5

Management accounting - internal control

Question 6

Uses of financial planning and cash budgets - external

Answer 6

procurement of finance

Question 7

What did Peter F Ducker describe innovation as?

Answer 7

Peter F Ducker - Innovation: “ a systematic, organised leap into the unknown”

Question 8

Typical cash outflows during early years for new technology firms:

Answer 8

• Premises
• Equipment
• Admin and research salaries
• IP costs - intellectual property eg patents, trade marks

Question 9

Why is cash flow forecasting difficult in the new technology based firms?

Answer 9

The future outcomes of current research are unpredictable, THEREFORE the focus for future research is unknown. THEREFORE the capital expenditure requirements are difficult to assess.

Question 10

What is the traditional method of forecasting demand for existing products or brands?

Answer 10

Time series

Question 11

What is the traditional method of forecasting demand for new brands or new variants of established products?

Answer 11

Previous launch data/regression

Question 12

What is the traditional method of forecasting demand for new products with an identified target market?

Answer 12

Survey of intentions
The 90/30 rule