What is a forecast?
a prediction of a future financial state
a tool guid, coordinate and control
What is strategic plan?
focus long term 2-10 years
general guide for managing the firm
What issues does a strategic plan asses?
developing new products
expanding and developing markets
adding capacity (new plants, offices)
financing all of the above
What is operating forecast?
Short term focus (rolling 4 quarters) future quarters; constantly forecasting; an expression of commitment
How does a operating forecast work?
begins with the sales demand forecast; add in the expense forecast and develop pro forma income statement
What a sales forecast?
most important ingredient;
too high; excess inventory
too low; inventory shortages
What does sales forecast ?
true or false?
some expenses rise at a approximate rate as sales
How to focast variable expenses?
variable expenses are those that rise and fall with sales; cogs and sales commissions q
What are lumpy expenses?
eg. rent, intrest expense
fixed rater than variable
How did the company's actuals compare to its forecast?
a variance analysis compares the actual financial results to the forecast and explains
when used wisely will forecast affect management?
it will cause management