topic 2.3.2 Flashcards
define sales revenue?
the total money a business earns from selling goods or services
what is the formula for sales revenue?
selling price per unit x quantity sold
What is the formula for total cost?
fixed + variable costs
define sales forecasting?
helps businesses predict future demand and revenue
What are the factors affecting sales forecasts?
consumer trends
economic variables
competitors actions
difficulties of sales forecast?
New businesses have no historical data
Unexpected external factors
Changing consumer behaviour due to trends and technology.
What is the breakeven formula?
fixed cost/selling price-variable costs
define break even?
when the total revenue is equal to the total cost meaning no profit or loss
What is the formula for margin safety?
ActualSales−Break-evenSales
define margin of saftey?
the difference between actual sales and break-even sales.
Draw a break-even graph?
search up a pic and see if ur right
what is a cash flow forecast?
help businesses track money entering and leaving the business
what is the net cash flow formula?
total inflow - total outflow
pros and cons of cash flow forecast?
pros:
Helps prevent liquidity problems.
Aids in securing loans and investments.
cons:
Forecasts are based on assumptions, which may be incorrect.
Unexpected events (e.g., supplier delays) affect cash flow accuracy.
What is favourable and adverse variance?
Favorable variance: When revenue is higher or costs are lower than expected
Adverse variance: When revenue is lower or costs are higher than expected
What are the difficulties in budgeting?
innacurate data
rigid budgets
conflict between departments
