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Financial Planning & Forecasting
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Cards (78)
What is one aim of budgeting for a business?
Planning
: Helps
plan
future
activities
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What does the expenditure budget indicate?
How much a business
intends
to
spend
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What does the revenue budget indicate?
How much a business
expects
to
earn
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What does an adverse variance indicate in revenue budgets?
Lower
than budget
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What does a favourable variance indicate in expenditure budgets?
Lower
than budget
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What is the variance for ticket sales if the budget is 11000 and actual is 12500?
1500
Favourable
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What is the variance for labour if the budget is 5500 and actual is 6000?
500
Adverse
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What is the variance for maintenance if the budget is 2300 and actual is 4000?
1700
Adverse
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What is the variance for marketing if the budget is 500 and actual is 500?
0
Favourable
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What are cash inflows?
Money
coming
into
the business
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What are cash outflows?
Money
going
out
of the business
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Give two examples of cash inflows.
Sales
revenue
,
loan
proceeds
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Give two examples of cash outflows.
Rent
,
utility
bills
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What is positive liquidity?
Enough
cash
to pay off
short-term
debts
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What is negative liquidity?
Not enough
cash
to pay off
short-term
debts
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What is the difference between sales and purchases?
Sales:
Selling
goods/services; Purchases:
Buying
goods/services
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What are the different types of cash inflows?
Sales
Rent
received
Loan
proceeds
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What are the different types of cash outflows?
Taxes
Salaries
/
wages
Return
bank
loans
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What is a cash flow statement?
An actual
record
of cash
inflows
and
outflows
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What is a cash flow forecast?
An
estimate
of future cash
inflows
and
outflows
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What are the two main purposes of cash flow forecasting?
Ensures
enough
cash to meet
obligations
Plans for
unexpected
shortfalls
or
surpluses
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What are the benefits of cash flow forecasts?
Maintains
suitable
cash flow for
expenses
Identifies
potential
cash flow
issues
early
Enhances
ability
to
secure
financing
or investments
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What are the risks of not using cash flow forecasts?
Unexpected
cash
shortages
Missed
growth
opportunities
Potential
damage
to business
reputation
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What are the eight methods to improve cash flow problems?
Speed up
invoicing
and
collections
Negotiate better
payment
terms with
suppliers
Reduce
unnecessary
expenses
Offer
discounts
for
early
payments
Improve
inventory
management
Secure
line
of
credit
Lease
rather than
buy
equipment
Increase
sales
through
promotion
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What are the potential negative impacts of cash flow solutions?
Reducing customer
credit
terms: May
reduce
sales
Using
cheaper
supplies
: Potentially
lower
quality
product
Raise
prices: Risk of
losing
customers
Laying off
workforce
: Reduced
productivity
Sell
inventory
at
lower
prices:
Lower
profit margins
Delay
expansion
plans: Missed
growth
opportunities
Delay
payments
to
suppliers
: Damage to
supplier
relationships
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How do you calculate sales revenue?
Quantity
x
Price
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How do you calculate total costs?
Total
fixed
costs
+ Total
variable
costs
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What is the break-even point?
The point where a business makes
no
profit
or
loss
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What is the break-even formula?
Fixed costs
/ (Sales revenue -
Variable costs
)
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What is the margin of safety?
The difference between
gross
revenue
and
break-even
point
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How do you calculate the margin of safety?
(
Actual
sales
-
Break
even
sales
) /
Actual
sales
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Why is the fixed cost line horizontal?
It
stays
the
same
throughout
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Why does the total cost line start at fixed costs?
Fixed costs exist even with
no
production
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Why does total revenue start at 0?
Product
may
not
be
sold
at all
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What should be the label on the x-axis of a break-even chart?
Quantity
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What should be the label on the y-axis of a break-even chart?
Revenue
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What happens to break-even and margin of safety with an increase in sales?
Break-even:
No
direct
effect
Margin of safety:
Increases
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What happens to break-even and margin of safety with a decrease in sales?
Break-even:
No
direct
effect
Margin of safety:
Decreases
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What happens to break-even and margin of safety with an increase in price?
Break-even:
Decreases
Margin of safety:
Increases
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What happens to break-even and margin of safety with a decrease in price?
Break-even:
Increases
Margin of safety:
Decreases
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See all 78 cards
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