Managing Your Finance-ENT

• Entrepreneurship
• Secondary Education

Answer in the chat box

Why do business owners need to make sales?

Chapter 21.2

Managing Your Finances

Pages 493-501

Objectives

Describe the forecasting of sales

Analyze the profit potential

Discuss the aging of your account receivable

Profit planning begins with forecasting sales. As an ongoing business, you can base your projections on sales records of previous periods. You can also include in those projections

consideration for the rate of sales growth in your industry and geographic area as well as the rate of growth of the gross

national product.

Suppose that in the car accessory industry,
sales have been up 7percent per year for
the last three years and inflation rates have
been stable at 2 percent. If you sold $700,000
of iPod docking stations last year, find the forecast sales.

Answer

7%+2%=9%

0.09X7,00,000=63,000

7,00,000+63,000=7,63,000

What is the sale this year?
What is the increased amount?
What is the sale next year?

Why do businesses require to forecast their sales?

If you are satisfied with your forecast, you do not need to adjust

your profit planning. However, most business owners want to

improve their company’s profit picture. One way to increase sales revenue is by selling more to your current customers and going into new markets.

The break-even formula looks like this:

FIXED COST = BREAK-EVEN POINT

(SELLING PRICE – VARIABLE COST)

You can sell each backboard for $350. The materials, labor, and other variable expenses will be about $250. Because you have to buy equipment to run your business, your fixed expenses will be $7,000. How many units would you have to sell to break even?

Why is it essential to find a breakeven unit?

What are business expenses that change with the
the volume of product produced such as supplies, wages, and production materials?

1. Break even units
2. Fixed expenses
3. Variable expenses
4. Break even point

What are expenses that do not change with
a number of units produced?

1. Fixed expenses
2. Breakeven unit
3. Break even point
4. Variable expenses

Keeping track of what clients owe you is known as aging your accounts receivable. By aging your accounts receivable, you can determine who is slow in paying and who pays promptly. When using a manual system, the best way to do this is by setting up an aging table.

It is June 30, and you are getting ready to age your accounts receivable. Listed below are your clients, the date an invoice was generated, and the amount of the invoice. Using the

table on the next page, mark the amount owed by each customer in the appropriate column. Then total the amounts due by “age” for your final answers. Note: In this business, an

invoice is due 30 days from the date of its issuance.

Client                        Date of Invoice                           Amount of Invoice

.A         .................... May 28 ........................................................ $ 63.57

B............................. April 17 ........................................................... 22.15

C ................................ March 10 .................................................... 92.18

D ................................ January 5 ................................................... 57.63

E ................................ April 20 ...................................................... 117.32

F ................................May 3 ............................................................. 15.16

G ............................... April 23 ........................................................... 19.83

H ................................ May 15 ............................................. 25.00

I ................................. April 6 ..................................................... 32.93

J ................................ February 3 .............................................. 56.65

K ................................June 15 ........................................................ 67.50

L ................................ January 29 ................................................ 88.98

M ............................... March 16 .................................................... 93.73

N ..............................April 18 .......................................................... .17.62

O ............................... March 20 ..................................................... 31.93

P ................................May 20 ....................................................... .87.20

Q ............................... February 20 .............................................. 76.30

R ................................ April 2 .......................................................... 91.73

S ................................ March 3 ....................................................... 18.20

T ................................June 2 ........................................................ 27.63

U ................................ May 21 ........................................................ .32.90

V ................................ March 11 .................................................. 41.73

W ............................... April 16 .................................................... 48.23

X ................................ January 20 .............................................. 56.30

Y ................................ March 14 ................................................. 11.25

Z ................................June 14 .................................................. 70.63

Client	Not Due	1-30 days Past due	31-60 Days Past due	61-9 days past due	Over 90 days
A		63.57
B			22.15
C				92.18
Total
Percent of total

Write the main points of the lesson.