2.4 KiB
Executable file
2.4 KiB
Executable file
Section 7 | Lesson 40 - Forecasting, Budgeting, Fiscal Year
- Links
- Notes
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
\[ \text{ISCP} = \frac{\text{average inventories}}{\text{COGS} \times 365} \]
time to turn credit (not assets) into cash
- when selling product on credit, how long does it take to turn it into cash
\[ \text{Sales to Cash Conversion Period} = \frac{\text{Average Receivables}}{\text{Sales}} \div 365 \]
time to pay your bills as late as possible
- Purchase to Payment Conversion Period
- pay your bills as late as you can
\[ \text{Purchase to Payment Conversion Period} = \frac{\text{average payables} + \text{average accrued liabilities}}{\text{COGS} \times 365} \]