business-haroun/mba/ch40.org

#+title: Section 7 | Lesson 40 - Forecasting, Budgeting, Fiscal Year
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* Links
- [[./../mba-main.org][TOC | Business]]
- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/4282974#overview][S07:L40 Forecasting, Budgeting, Fiscal Year]]

* Notes
How do companies make budges
How do they forcast

** How do companies make budgets
*** Forecasting is always based on a percentage of sales.
- forecast what your sales are going to be
- everything else is just a percent of revenue

*** when companies forecast
- Public companies forecast quarterly
- Startups forecast monthly
  - survival is the goal
  - most startups collapse

***  Fiscal years
- companies note when a season ends
- companies also regard their years as "ending" on a different months
- some companies end on black friday
  - this is when they make their most money
- japanese companies end in march

** Ethics
- be conservative and honest with forecasts
- jailtime
  - it's easy to make clerical mistakes
  - overlook unethical co workers
- some companies try to take from a different quarter to make up shortfalls

** Cash Conversion Period Ratio
- *COGS*: Cost of Goods Sold
  - how much it costs for goods for the day

*** examples
- $5000 of inventory
- COGS is $50
- we have 100 days worth of goods

if we put $1 into inventory it won't be converted into cash for another 50 days

** Inventory to sale conversion period
- you can also do this by season, just replace 365 days with 90 days
\(\text{ISCP} = \frac{\text{average inventories}}{\text{COGS} \times 365}\)

** Purchase to Payment Conversion Period
- pay your bills as late as you can
\(\text{Purchase to Payment Conversion Period} = \frac{\text{average payables} + \text{average accrued liabilities}}{\text{COGS} \times 365}\)