• Join over 1.2 million students every month
• Accelerate your learning by 29%
• Unlimited access from just £6.99 per month
Page
1. 1
1
2. 2
2
3. 3
3
4. 4
4
5. 5
5
6. 6
6
7. 7
7
8. 8
8
9. 9
9
10. 10
10

# Sales forecast limitations.

Extracts from this document...

Introduction

Financial Plan Sales forecast for the year ended 31 December 2002 January �38,417 * February �38,417 * March �42,686 * April �42,686 * May �42,686 * June �469,55 * July �46,955 * August �46,955 * September �42,686 * October �42,686 * November �42,686 * December �44,820 �518,635 Sales forecast limitations Businesses are always trying to predict the future. This helps with planning and beating competitors. One simple way of predicting the future is to assume that it will be just like the past. Another way is forecast the sales figures using primary research. For the immediate future this may be very realistic. However such stability and predictability are rare. The values of data plotted over time, called time-series analysis, can vary because of seasonal influences and also because of genuinely random factors, which can never be predicted. Cash Flow Forecast Cash flow is a movement of cash into and out of a business. A cash flow forecast sets out the anticipated cash inflows and cash outflows over the coming months. Each column shows money coming into and out of the business in that month. The forecast then shows the effect of each month's cash flows upon the firm's cash balance/total. ...read more.

Middle

Net Profit 59,191 . 5 Second Year of trading: Forecasted Trading and profit and Loss a/c for the ended 31 December 2005 Revenue 570,503 Opening stock - Net purchases 171,154 Stock available 171,154 Less closing stock (4,437) Cost of goods sold (166,717) Gross Profit 403,786 Less expenses: Wastage of material. 9,684 Depreciation on property (5%) 17,500 Rent 90,000 Waitress wages 39,420 Accountant 4,164 Chefs and Assistants 55,188 Loan interest 15,000 Electricity 5,040 Advertising 3,800 Casual labour 13,140 Gas 300 Heating 584 Insurance 2,400 General expenses 3,600 Barmen 24,091.2 Total expenses (283,911.2) Net Profit 119, 874. 8 Balance Sheet Extracts of: First Year of trading: Forecasted Balance Sheet for the year ended 31 Dec 2004 Fixed assets Capital Fixtures & fittings 350,000 - depreciation (17,500) Net profit 59,191.5 332,500 Long-term liabilities Loan 150,000 Current Assets Stock 4,034 Current liabilities Bank 133,782.5 Creditors 17,064 Property(outstanding) 233,334 Second year of trading: Forecasted Balance Sheet for the year ended 31 Dec 2005 Fixed assets Capital Fixtures & fittings 350,000 - depreciation (17,500) Net profit 119,874.8 332,500 Long-term liabilities Loan 150,000 Current Assets Stock 4,437 Current liabilities Bank 168,828.3 Creditors 18,770 Property (outstanding) 116,667 Ratio Analysis The function of accounting is to provide information to stakeholders on how a business has performed over a given period. ...read more.

Conclusion

Although it is a rudimentary technique, break-even analysis can cope with changing circumstances. We have seen that the technique can allow for changing revenues and costs and gives a valuable rule-of-thumb guide to potential profitability. However, break-even does have some drawbacks. It pays little attention to the realities of the marketplace. A major flaw is that it assumes all output is sold. This may well be untrue and, if so, would result in an inaccurate break-even estimates. If a firm sells less than it produces it incurs costs without earning the corresponding revenue. This will substantially reduce profits. In times of recession, a firm may have difficulty in selling all that it produces. Although break-even can cope with changes in prices and costs, in the real world such factors change regularly making it difficult to as a forecasting technique. Changes in tastes and fashions, exchange rates and technology are all examples of factors, which could invalidate break-even forecasts. The model assumes that costs increase constantly and that firms do not benefit from economies of scale. Similarly, break-even analysis assumes the firm sells all its output at a single price. In reality firms frequently offer discount for bulk purchases. Finally, break-even analysis is only as good as the data on which it is based: poor quality data can result in inaccurate conclusions being drawn. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

## Found what you're looking for?

• Start learning 29% faster today
• 150,000+ documents available
• Just £6.99 a month

Not the one? Search for your essay title...
• Join over 1.2 million students every month
• Accelerate your learning by 29%
• Unlimited access from just £6.99 per month

# Related GCSE Accounting & Finance essays

1. ## cash flow

3 star(s)

* Late credit payments: This means that customers are allowed to pay for goods a few weeks after they have received them. This would affect us because if the customer make late payments we will lose large amounts of money and that would mean that we will be short of cash.

How many packs of chocolate do you usually buy a week in average? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 15+ 9. How many cones of ice cream will you buy in summer in average?

1. ## annual cash flow forecast

For example, in summer and winter we will have to spend more on outflows because during these season there is a high demand of stock because of sales and that will also mean that we will make more profit than in spring and autumn, but if we make enaugh profit

2. ## Comsat case

Comsat and AT&T had some similarities, for example, these companies were in the telecommunication business and they were subjected to government regulations. However, the use of AT&T as a benchmark to estimate Comsat's cost of equity is not suitable because there were more differences than similarities.

1. ## Give an explanation of break-even analysis and explain how it supports the achievement of ...

In this case, it is 125 000kg per year. Various pieces of information can be taken from a break-even chart such as Fig 3. As well as the break-even output it also shows the level of profits earned, or losses incurred at every possible level of output, Any level of

2. ## This report has been produced as evidence for Unit 9 - 'Financial Services' - ...

and the shares prices can dramatically increase in price but can also severely decrease in the value at which they were brought at also. The higher the risk of amounted invested the higher there can be a loss but also potential of greater benefits for profits.

1. ## Complete Report on Askari Commercial Bank

Import Related Finance * Payment Against document * Finance Against imported Merchandise * Finance against Trust receipt 7. Export Related Finance * Pre-shipment Finance * Post shipment Finance * Finance Against Packing Credit * Finance against Foreign bill * Foreign bill purchase 8.

2. ## Financial Analysis of Matalan PLC

the figures in the next set of annual reports were not as flattering. Another point for the people at Matalan and investors to be aware of is that Marks and Spencers, its major rival has seen its share price go up recently after a dismal couple of years.

• Over 160,000 pieces
of student written work
• Annotated by
experienced teachers
• Ideas and feedback to