sales forecast

Dear apprentices:
This time you will learn new information related to Sales Forecasting and Financial
Indicators. After going through this material, you will be able to accomplish the fol-
lowing learning goals:

Understanding the importance of preparing comprehensive

sales budgets, financial statements and financial indicators
that can guide a company in making good financial deci-
sions and promoting profitability by setting realistic future
goals

Producing simple phrases or sentences in English to express

ideas or concepts

Carrying out short and practical social exchanges, with suf-

ficient vocabulary to make a simple presentation or hold a
simple conversation on technical topics in English

Lets listen!
To fulfill our learning goals, lets start by listening and reading along the following
information.

LETS LISTEN
Listen and read along the introductory slides that will give you notions on how to
develop a Sales Budget.

The Sales Budget is the first input a company needs to estimate incomes, costs, ex-
penses and generally, all the elements that make up the financial statements. As a
summarized account of the sales expectations of a business, the importance of this
document turns out to be vital, given that in turn, it will guide the company into mak-
ing accurate decisions regarding production schemes, marketing strategies, financial
area management, sales monitoring mechanisms, timing and potential profitability.

From the Sales Budget and Costing of operating the production and commercial activities of
a business, organizations can plan their financial statements, and thus determine their profit-
ability and potential benefits. Additionally, at the end of every accounting period or fiscal
year, an organization gets relevant information through their final financial statements which
can be respectively analyzed, using some financial indicators to measure results.
Given the importance that preparing a sales budget has for the marketing field, this
material will provide you with a general framework for understanding the crucial role
Sales Budget, Financial Statements and Financial Indicators play in business planning
and sustainability.

Now, dear apprentices, I invite you to go to the Lets read section and study the top-
ics related to price and sales budget. It is very important for the job you have to do.
Good luck fellows!

Lets read!
After listening to the importance and basic concepts of Sales Budget, its necessary to
do a different type of exercise. Lets read then!
When addressing the topic of Sales Forecast, it is necessary to start by checking some
aspects related to strategic pricing.

Here you will be provided with useful information so as to help you understanding
how different elements can operate to facilitate the process of establishing sales tar-
gets. Lets have a look at some definitions.

Price
In general its the value given in exchange for transfer of ownership as its the essence
of commercial transactions. Three main parties take part in the process: the buyer, the
seller and the competition.
Price is the first and more relevant component of the classic 4 Ps of marketing (Price,
Product, Placement and Promotion).

Pricing is usually regarded as a difficult subject because when it comes to fixing prices
you necessarily have to take into consideration a lot of factors. Generally, when you
decide on a price you need to:
- Analyze other competitors proposals.
- Ask yourself whether the price will be paid or not.
- Consider if the price will help you achieve income targets and meet market
expectations.
- Consider if the price will help you maximize your profits.

You can use several programs and some free pricing strategy calculators
to determine price elasticity, and calculate the price that provides
the highest revenue and profit.
Pricing Strategy Key
Pricing is usually affected by your product design, channel, and promotional activities.
Take a look at the following chart and observe how different companies set their prices
according to their profiles and needs.

Adapted from: http://www.marketingmo.com/strategic-planning/how-to-develop-a-pricing-strategy/

Sales budget
A Sales Budget is a must for all companies, even for the smallest businesses, because it
is the basis for making accurate financial decisions and a good planning process. Plan-
ning a budget helps to:

- Determine the production plan to satisfy customer orders.

- Indicate the minimum required quantities of raw materials, machinery and staff.
- Facilitate the projection of the financial statements, especially cash flow.

Sales forecasting is also a procedure a lot of companies use to set their goals and or-
ganize their operating plans.
In the following example, you will have the opportunity to see how the budgeted sales
in units and selling prices relate in a Sales Budget.

WE RECYCLE Inc.
Sales Budget December 31

For the next group of terms, its important to remember that all operational and ad-
ministrative activities of a company or project are recorded in an accounting system.
They are consequently analyzed and condensed to prepare the Financial Statements.
There are three main types of Financial Statements: Balance Sheet, Income Statement
and Cash Flow Statement.

Now, go ahead and check them one by one!

Balance sheet:
It reflects the structure of a company and has information regarding a companys as-
sets, liabilities and available capital. This information is presented at the end of a re-
porting period or on an annual basis.

Income statement:
It reflects the results of a companys operation in terms of incomes, expenses, profits
and losses over a year or particular period of time of a project.

Cash Flow statement:

It indicates cash flow changes (inflows and outflows) over a particular period of time.

The main purpose of Financial Statements is to provide information on a business

current financial position, performance and changes in its financial position to a wide
range of users, in order to support and guide management decision-making. Such us-
ers can be divided in several groups:

Share holder: Use information to assess performance of the management.

Management: Responsible for day to day business management. Need information

on financial situation of business, i.e. current and expected situation in the future.

Trade Partners: Suppliers selling goods need information on security of their sales
and payments. Customers buying goods need information on security and stability of
their purchases.

Creditors: Need an assurance that loans granted to a business and interests on those
loans will be paid on time.

Taxation authorities: Use information for assessment of taxes, including sales tax.

Financial analysts: Use information to provide services to clients (investors, credit

agencies).

Public: Businesses are part of the public. They contribute to local economy, employ-
ment, usage of local resources and environmental preservation. Information here is
used to evaluate such contribution.

Government institutions: Use information to allocate resources for statistical purposes.

Adapted from: http://www.bookkeeping-financial-accounting-resources.com/what-is-accounting.html

Now, we need to know which tools can be used as indicators to reveal the current
conditions of our business. In order to do so, lets find out what Financial indicators
are.

Remember that the idea is to practice our reading, so keep on reading!

Financial indicator or ratio:

A financial ratio or indicator is a relative magnitude of two numbers selected from the
financial statements of a company. As the financial statements themselves, it is used
by administrators or project stakeholders to interpret and evaluate financial perfor-
mance. The financial performance indicators are grouped into:

- Use
- Profitability
- Liquidity
- Financial structure
- Investment

You can use several programs and some free financial indicators generators
to make and analyze financial statements, ratios, and indicators.

REFERENCES

References
Marketing MO. (2012) Pricing. Recuperado el 31 de marzo de 2012, de http://www.
marketingmo.com/strategic-planning/how-to-develop-a-pricing-strategy/

Accounting for Management. (2012). Sales budget. Recuperado el 31 de marzo de

2012, de http://www.accountingformanagement.com/sales_budget.htm

U.S. Securities and Exchange Commission (2007), Beginners Guide to Financial State-
ments. Recuperado el 10 de abril de 2012, de http://www.sec.gov/investor/pubs/beg-
finstmtguide.htm

Baruch College (2012). Guide to Financial Statements. Recuperado el 10 de abril de

2012, de http://www.baruch.cuny.edu/tutorials/statements/view_tutorial.html

Windows Lisisoft (2012). Financial Indicators Recuperado el 10 de abril de 2012, de

http://www.lisisoft.com/tools/Financial-Indicators.html
Now, we need to know which tools can be used as indicators to reveal the current
Dunn, P. (2012). Financial Performance Indicators. Recuperado el 10 de abril de 2012,
conditions of our business. In order to do so, lets find out what Financial indicators
de www.managementjournals.com/journals/finance/article10.htm
are.
Accounting Learning Resources (2012). Introduction to Accounting. Recuperado el 13
Remember that the idea is to practice our reading, so keep on reading!
de abril de 2012, de http://www.bookkeeping-financial-accounting-resources.com/
what-is-accounting.html
Financial indicator or ratio:
A financial ratio or indicator is a relative magnitude of two numbers selected from the
Logotipos
financial statements of a company. As the financial statements themselves, it is used
by administrators or project stakeholders to interpret and evaluate financial perfor-
Mercedes Benz
mance. The financial performance indicators are grouped into:
http://www.publicamion.com.co/noticias/mercedes-benz-en-colombia-nueva-ima-
gen-tridimensional/mercedes-benz-en-colombia-nueva-imagen-tridimensional-logo.
jpg - Use
- Profitability
Mont Blanc
- Liquidity
http://www.firstluxe.com/2012/11/14/uwe-ellinghaus-nouveau-vice-president-de-
- Financial structure
uwe-ellinghaus/#.UdRM-vk9_nE
- Investment
Ford
http://autosmexico.mx/wp-content/uploads/2012/03/ford-logo.jpg
You can use several programs and some free financial indicators generators
Lamy to make and analyze financial statements, ratios, and indicators.
http://www.pencraftsa.com.au/blog/?tag=lamy

Renault
http://autosmexico.mx/wp-content/uploads/2012/03/Renault_logo.png

Bic
http://mm.queaprendemoshoy.com/wp-content/uploads/2011/10/bic_logo1.png