#+title: Section 7 | Lesson 40 - Forecasting, Budgeting, Fiscal Year
#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/business.css" />

* 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
- some companies try to take from a different quarter to make up shortfalls
- jailtime
  - it's easy to make clerical mistakes
  - overlook unethical co workers

** time to turn asses into cash
*** Cash Conversion Period Ratio
  - when do we get PAID baby?
  - *COGS*: Cost of Goods Sold
    - how much it costs for goods for the day

**** example
- $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
- measures on a yearlly bases how long it takes to turn inventory to cash over a year
- you can also do this by season, just replace 365 days with 90 days
  #+NAME: inventory_to_sale_conversion
  \[
  \text{ISCP} = \frac{\text{average inventories}}{\text{COGS} \times 365}
  \]

** time to turn credit (not assets) into cash
- when selling product on credit, how long does it take to turn it into cash
#+NAME: sales_to_cash_conversion
\[
\text{Sales to Cash Conversion Period} = \frac{\text{Average Receivables}}{\text{Sales}} \div 365
\]


** time to pay your bills as late as possible
- Purchase to Payment Conversion Period
- pay your bills as late as you can
#+Name: purchase_to_payment_conversion
\[
\text{Purchase to Payment Conversion Period} = \frac{\text{average payables} + \text{average accrued liabilities}}{\text{COGS} \times 365}
\]