Quantitative sales forecasting

Question 1

Sales forecasting

Answer 1

sales figures can be collected at consistent time intervals and presented in time order

Question 2

Investment appraisal

Answer 2

• businesses often need to invest in order to achieve their objectives
• any situation where you have to spend money in the look of making money in the future is risky
• when firms are making strategic decisions about how to invest their money gather as much data as possible so can work out risk and reward involved

Question 3

there are 3 main methods that businesses can help answer if investments are a good idea:

Answer 3

Payback period - is the time it takes for a project to make enough money to pay back the initial investment
calculation: Payback period =
amount invested divided by annual net cash flow

Average rate of return (ARR)
- it compares the net return with the level of investment
- higher the ARR the more favourable
- ARR = average net return divided by investment x100

Question 4

Investment appraisal methods are used for what:

Answer 4

to predict cash flows for different projects that a firm is considering

Question 5

AD and DIS for paybacks and ARR

Answer 5

Payback AD - very good for high tech projects or any project that provides long term returns
DIS - ignores cash flow after payback
- ignores the time value of money

ARR - AD - it takes account of all the projects cash flow
DIS - ignores the timing of the cash flow and the time value of the money

Question 6

Critical path analysis 5 parts what are they

Answer 6

Earliest start time (EST) - an activity cant be started until previous has finished

Earliest finishing time (EFT) - its the time that the activity will finish if its started at the EST

Latest start time (LST) - its the latest time an activity can be stated and still be finished by it LFT

Latest finishing time (LFT) - the latest time by which the activity can be completed without holding up the completion of the product

Float time (FT) - is the length of time you can delay an activity without delaying the completion of the project
- only non critical activities have float time

Question 7

When is it used (CPA)

Answer 7

used when implementing a strategy or planning a complicated project such as launching of a new project
allows a business to work out when they’ll need resources ti be available