Managing Business Activities Flashcards
What is a Cash Flow Forecast?
A diagram displaying the movement of cash in and out of the business
Cash Flow formula
Cash Flow = Inflow - Outflow
Formula for Profit
Profit = Revenue - Costs
What is Sales Volume?
It is the number of times a product has been sold
What is Sales Value?
It is the amount of money the product is producing in the market\
What is the purpose of Sales Forecasting?
To plan costs of employees and to manage Resources
What are Social Factors that affect Sales Forecasts?
- Consumer trends
- Shopping habits
- Demographics
What are Economic Factors that affect Sales Forecasts?
- Interest rate
- Employment
- Stages in Economic Cycle (Period of
BOOM and Period of Recession)
Difficulties of Sales Forecast
- The future is unpredictable
- Lack of precise information due to
unpredictability in market
Revenue Formula
Revenue = Cost x Quantity of sales
What is a Supply and Demand graph?
It is a graph displaying the effects of supply and demand on the price, quantity of products and the amount of revenue a company will receive.
Break Even formula 1
fixed cost/contribution
Break Even formula 2
fixed cost/contribution per unit
Meaning of Break Even?
It is the point when a companies’ total revenue equals the total cost meaning there is no profit or loss being made
Contribution formula
contribution = selling price - variable cost per unit
Weaknesses of break even graph
- based on predictions
- ignores changes in variable costs
- only indicates how many units are needed
to sell but does not actually sell them
Strengths of Break Even graph
- Allows business to calculate number of
units needed to sell for the business to be
viable - It helps decision making
- Provides a target
What is Boston Matrix?
Its a square graph displaying what products are doing and what they aren’t
What are the 4 aspects of a Boston Matrix?
- Cash Cow
- Stars
- Dogs
- Question Marks
What is a cash cow product?
A product that generate more money than what is invested into them
What is a star product?
A product with a high market share in a high growth market
What is a problem child/question marks
Low share of a high growth market ( they consume more resources than they produce but have a lot of potential )
What are Dog products?
Low share of a low growth market
What is the Margin of Safety?
The amount of units sold or produced after the break-even point
Design mix
3 elements a business must consider when developing a product or service
What are the 3 components of a design mix?
- aesthetics
- cost
- function
What are factors that affect how a product would be placed on the design mix?
- social trends
- different markets will have different uses for the same thing
How can a business stay ahead of the factors affecting how a product places on the design mix?
Market Research
Difference between profit and cash?
- time (profit is measured yearly meanwhile cash is measured day to day)
- cash = liquidity meanwhile profit = profitability
What does PED stand for?
Price elasticity of demand
What is YED?
Income elasticity of demand
What does income elasticity of demand (YED) mean?
The responsiveness of product demand to a change in income
What does price elasticity of demand (PED) mean?
The responsiveness of demand to a change of price
What is formula for YED?
% change in quantity demanded / %change in income
What formula for PED?
% change in demand / %change in price
Formula for contribution
Selling price per unit - variable cost per unit
