Flashcards in 2.2 financial planning Deck (55)
what is sales volume?
- the amount of output sold in a particular time period
what is the formula for sales volume?
what is sales revenue?
- the value of output sold in a particular time period
what is the formula for sales revenue?
price X sales volume
what is a fixed cost?
- costs which don't change with the level of output
what are variable costs?
- costs which change directly with the changes to output
what is a semi-variable costs?
- a costs that consist of both fixed and variable element
- e.g labour
what's the formula for variable costs?
- variable cost Pu X units produced
what's the formula for total costs?
variable costs + fixed costs
what's the formula for average costs?
what's the formula for profit?
revenue - total costs
what is capital expenditure?
- money spent on long term assets such as buying a factory
what is revenue expenditure/
- money spent on buying day to day items such as raw materials
what is a debtor?
- owes the business money
what is a creditor?
- owes 3rd parties money
what does insolvent mean?
- a business doesn't have enough cash to pay costs
what's the formula for net cash flow?
inflows - outflows
what's the formula for closing balance?
opening balance + net cash flow
what is liquidity?
- ease with which assets can be turned into cash
what is capital?
- the amount of money which has gone into the business
what is sales forecasting?
- projection of future sales revenue, often based on previous sales data
what is time series data?
- a method that allows a business to predict future levels from past figures
what is extrapolation?
- forecasting future trends based on past data
what are benefits of sales forecasting?
- helps inform cash flow forecasting and accurate budgeting
- enables them to predict appropriate staffing levels
- helps understand demand
what is the Delphi method?
- involves getting a group of market experts to provide an opinion on the forecasting task
what does breakeven mean?
- where a business makes neither a profit or a loss
what's the formula for breakeven?
- total costs = total revenue
what are 3 ways to find breakeven?
- calculate using a table of costs and output
- interpreting charts
- using a formula
what is margin of safety?
- the difference between the actual units of output and the breakeven output