Quantitative Sales Forecasting
The process of predicting future sales based on past data.
A: What is sales forecasting?
This investment appraisal method calculates how many years it takes to recover the initial cost.
A: What is payback period?
A decision-making tool that shows possible outcomes in a tree-like diagram.
A: What is a decision tree?
CPA is a technique used to plan and control this type of project.
A: What are complex projects?
Contribution is calculated as selling price minus this.
A: What are variable costs?
The method of smoothing out fluctuations in sales data by averaging is called this.
A: What is moving averages?
The method that looks at the difference between average annual profit and initial cost, expressed as a percentage.
A: What is average rate of return (ARR)?
The value calculated by multiplying the outcome by its probability.
A: What is expected value?
The line of tasks that determines the minimum time to complete a project is called this.
A: What is the critical path?
The point at which total revenue equals total costs.
A: What is break-even?
A benefit of sales forecasting is that it helps firms plan this, relating to production and staffing.
A: What is capacity?
This appraisal method takes into account the time value of money.
A: What is net present value (NPV)?
Decision trees are useful because they force managers to consider this systematically.
A: What are risks and probabilities?
The difference between the time available and the time taken for an activity.
A: What is float (or slack)?
Contribution per unit × number of units sold gives this.
A: What is total contribution?
A limitation of sales forecasting is that data may be distorted by unexpected changes in this.
A: What is the external environment (e.g. economic conditions)?
A weakness of payback period is that it ignores this, which affects long-term projects.
A: What is profitability after payback?
A limitation of decision trees is that they rely heavily on these, which may be inaccurate.
A: What are estimates/assumptions?
A benefit of CPA is that it helps firms use these more efficiently.
A: What are resources?
Break-even analysis is useful for understanding the level of this required for profitability.
A: What is output (or sales volume)?
The difference between actual sales and forecasted sales is known as this.
A: What is variance?
The discount rate that makes NPV equal to zero is called this.
A: What is the internal rate of return (IRR)?
The financial return a business expects to gain from an option, before multiplying by probability.
A: What is the monetary value of an outcome?
A limitation of CPA is that it does not account for this, such as strikes or supply delays.
A: What are unforeseen external factors?
A limitation of contribution analysis is that it assumes costs and revenues are always this.
A: What are linear (constant)?