Lesson 6 Flashcards
(34 cards)
What is a forecast in business finance?
An estimate or prediction of what a business expects to achieve in revenue or incur in costs.
Why is it important for businesses to forecast revenue and costs?
To set realistic budgets, manage resources, reassure stakeholders, and avoid poor decisions that affect cash flow or reputation.
What can poor forecasting lead to?
Over/under supply, poor cash flow, reduced profits, and damage to reputation.
What is sales revenue?
Income from selling products or services.
What are value-added products?
Products created by processing, e.g. turning milk into cheese or fruit into jam.
How can a business generate rental income?
By leasing land, accommodation, or equipment to others.
What are commodity price gains?
Increased revenue from buying commodities in advance and benefiting from market price increases.
Name two other types of revenue.
Revenue from events (educational/seasonal) and government grants/subsidies.
How is historical data used in revenue forecasting?
It reveals trends and patterns from past sales to predict future income.
What does market research help forecast?
Revenue from value-added products and customer-driven demand changes.
What is price modelling used for?
To forecast future changes in commodity prices.
What is scenario analysis?
Assessing the impact of various internal/external factors on revenue.
How can customer surveys assist in revenue forecasting?
They reveal customer interest in new or niche products.
What is the role of lease agreement reviews in forecasting?
To anticipate revenue from rental income by reviewing tenant agreements and market conditions.
Why are production/yield projections important?
They forecast income from crops or livestock based on expected yields and weather.
How do government programmes affect revenue forecasts?
They provide income through grants and must be evaluated for eligibility and timing.
What are direct costs?
Costs directly tied to producing a product or service (e.g. raw materials).
What are indirect costs?
General business expenses like rent or Wi-Fi not linked to a specific product.
Define fixed costs.
Costs that remain constant regardless of output (e.g. equipment leases).
Define variable costs
Costs that increase/decrease with production (e.g. more feed for more livestock).
What are opportunity costs?
The value of the best alternative not chosen (e.g. revenue lost by not growing a different crop).
What are sunk costs?
Past expenses that cannot be recovered (e.g. non-refundable deposits).
What are operating costs?
Day-to-day expenses including cost of goods sold and admin costs.
What are controllable costs?
Costs that can be influenced by internal decisions, like labour or advertising.
