Financial planning

Question 1

Sales forecasting

Answer 1

Predicted amount of sales revenue a business expects to generate within a specific period

Question 2

Purpose of sales forecast

Answer 2

-Volume & value of sales
-Size of the market
-Sales as a result of promotional activity

Question 3

Use sales forecast to

Answer 3

Know:
-Staff needed
-Stock needed
-Capacity needed
-Finance required

Question 4

Factors that impact sales forecasting

Answer 4

-Seasonality
-Fashion & trends
-Economic variability (economic growth, interest rates)
-Action of competitors

Question 5

Limitations of sales forecasts

Answer 5

-Only a prediction from past trends
-Competitors actions & economic influences can happen suddenly

Question 6

How a business interprets a break-even chart

Answer 6

-Estimating future level of output required to meet bus objectives
-Identify how a change in price impacts breakeven + profit level
-Shows how changes to costs or revenue impact the business

Question 7

Limitations of breakeven charts

Answer 7

-Assumes the business is going to sell all the stock it produces
-Are a static model, do account for change
-Makes assumptions, like variable costs could be reduced if bulk buying so won’t be constant