What are the steps of financial planning?
- Forecast sales/revenues (S)
- Determine the firm’s production plan
- Project the cash budget
- Forecast the pro-forma financial statement
What is financial forecasting?
Financial forecasting reffers to make projections based on a set of relevand info/data in order to allow/ease the firm’s budgeting activities.
What are the sales forecasting methods?
- Subjective
- Objective
How can you caracterise the subjective sales forecasts methods?
They are based on rationales, judgements, intuition and experience
How can you characterise the objective sales forecasts methods?
They use quantitative methods of forecasting and extrapolating
What are the advantages of the sales team (marketing department)?
- Direct contact with customers
- Identifies the products with strong/weak dynamics
- Detect trends in the customers’ orders
What are the disadvantages of the sales team?
(Marketing department)?
- A substantial part from the sales team revenues/salaries are performance bonuses
- There is a tendency that the sales team will intentionally forecast lower future sales in order to be able to easily surpass these targets (for earning the performance bonuses)
What are seasonalities?
Seasonalities are patterns that repeat at fixed time intervals
Ex: ice cream consumption (repeats yearly)
What are cycles?
Cycles are patterns that repeat at variable time intervals
