3.3/3.4

Question 1

limitations of quantitative sales forecasting

Answer 1

Past performance is no guarantee of the future – Changes in the market or fashions and trends may cause a change in sales differing from past sales.

Other factors can affect future predictions (PESTLE)

Relies on past data – This may not always a good indication of what may happen in the future.

Time consuming – Complex to make.

Question 2

What is pay back period

Answer 2

the time it takes for a project to make enough money to pay back its initial investment

Question 3

pay back period (eq)

Answer 3

amount invested / annual net cash flow

Question 4

ARR formula

Answer 4

average net return / investment x100

Question 5

Drawbacks of pay back period

Answer 5

-ignores cash flow after payback
-ignores time value of money (depreciation)

Question 6

benefits of pay back period

Answer 6

-easy to calculate and understand
-good for technological projects as payback needs to be quick
-reduces risk of a loss

Question 7

Drawbacks of ARR

Answer 7

-ignores the timing of the cash flows
-ignores the time value of money

Question 8

Benefits of ARR

Answer 8

easy to calculate and understand

takes into account all cash flows

Question 9

What is NPV?

Answer 9

the sum of the present values of cash flows - the cost of the initial investment

Question 10

calculation for the return

Answer 10

NPV / investment x100

Question 11

benefits of decision trees

Answer 11

managers have to work out real values of the potential pay off and think about probability instead of vague statements
can compare options quantitively and objectively

Question 12

drawbacks of decision trees

Answer 12

• only quantitative
  -probabilities hard to predict accurately changes from person to person there opinion

Question 13

benefits of critical path analysis

Answer 13

• ensures deadlines are met for critical a activities
  -helps forecast cash flow as It gives EST when cash will need to be spent
  -finds shortest time possible

Question 14

drawbacks of critical path analysis

Answer 14

• only estimates of how long each task will take not too accurate
• short set deadlines can lead to employees cutting corners which means quality may suffer
• doesn’t mention costs

Question 15

short- termism

Answer 15

make decisions to increase financial performance over short time periods

Question 16

benefits of short termism

Answer 16

-attractive to managers as their bonuses based of short term performance
-Shareholders happy
- good for new businesses looking to survive

Question 17

drawbacks of short termism

Answer 17

• little / no investment in tech, training , research
• reduces competitiveness long term
  -affects future profits

Question 18

long termism

Answer 18

concentrate on reaching long term goals

Question 19

benefits of long termism

Answer 19

• more investment into tech, r and d
  -more competitive and profitable long term

Question 20

drawbacks of long termism

Answer 20

• not useful for businesses looking to survive
  -still might use short term if changes in demand rapid

Question 21

subjective decision making

Answer 21

‘gut’ feelings, opinions, experience

Question 22

benefit and drawback of evidence based decision making

Answer 22

+easier to justify as its based of verified facts -
-can be time consuming as circumstances may change during the decision

Question 23

benefit and drawback of subjective decision making

Answer 23

+decisions made quickly which means firms can take advantage of short term opportunities
-instincts wrong or biased

Question 24

corporate culture

Answer 24

reflects the firms values, its the way things are done in the firm and they way things are expected to be done

Question 25

Strong and weak corporate cultures

Answer 25

Strong - when employees agree with corporate values of the business weak - where the employees of a firm don't share the firms values and are forced to comply

Question 26

Power culture

Answer 26

Centralised structure where decisions are only made by a few or one person - may struggle if business grows -employees feel like a cost as can’t give their opinion -may be resistant to change as not enough faith in SMT

Question 27

Role culture + and -

Answer 27

Authority is defined by job title. Decisions come from senior managers. Tendency to have poor communication P- change is rare as avoid risk of failure N- change may meet resistance as staff not used to doing things differently

Question 28

Person culture + and -

Answer 28

Loose organisations of individual workers such as solicitors or accountants Objectives will be defined by the personal ambitions P-decisions made jointly so are comfortable with them N- decisions about change difficult as people want different things

Question 29

Task culture

Answer 29

Emphasis on getting tasks done Small teams work on a project

Question 30

5 factors that affect how corporate culture is formed

Answer 30

- businesses founders -history of the business -nature of the business e.g its products such as a hairdresser likely to have person culture -working conditions and rewards -attitude to customer service

Question 31

2 reasons managers choose to change corporate culture

Answer 31

- preferences of its leaders, new leaders may come and want it to be like their old business -be more competitive

Question 32

4 difficulties in changing corporate culture

Answer 32

Employees usually resist change Have to change attitudes and behaviours of staff Difficult if culture is strong Expensive

Question 33

ethics

Answer 33

principles that govern which behaviours are morally acceptable to society, individuals or groups

Question 34

4 ethical issues

Answer 34

location- cheap overseas labour suppliers- suppliers exploiting workers bribery or corruption selling tactics- staff persuading customers to buy something but not mention hidden costs

Question 35

What is CSR

Answer 35

Corporate social responsibility means businesses got above and beyond what is ethically required to help society

Question 36

benefits of CSR

Answer 36

- improves brand loyalty and attracts new customers -more people will choose to work for you - improved staff morale

Question 37

drawbacks of CSR

Answer 37

- costs , may not go down well with shareholders - costs may be passed to customers -small businesses unlikely to use CSR due to low funds