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Financial Forecasting Essay

1698 words - 7 pages

UNIT 3
FINANCIAL FORECASTING FOR BUSINESS

TASK 1

Start-up costs are linked and associated with setting-up a business such as legal fees, purchasing of equipment, rented property deposit. Start-up costs means a different sort of costs, which a new business owner should get in so that the business can exist.
Operating costs are expenses that relate to a business activities and they are divided into fixed and variable costs. Different businesses have different costs associated with them.
Variable costs are expenses which keep changing in proportion to the activities of a business. Also they are one of the components in calculation of a total costs and they vary for example with the ...view middle of the document...

The revenue could be operating revenue or non-operating revenue. For example operating revenue is the profit which the business earns selling goods or provides service. Non-operating revenue is the money earned from some side business operation like interest rate received, taxes, bank loan.
JD Sports Plc. has operating revenue which they earn selling goods like sports wears, fashion wears and accessorizes. As a big sport fashion company their revenue is the most important thing together with satisfied customers. As a big company JD Sports is linked with big profit per year. There are several methods which they do to increase their profit:
* Promotions
* Expand the business in different countries
* Advertising
* Market share increase
* Reduce cost
This year 16 new store were opened and basic earnings per share has increased by 3.5% from 79.71p to 82.50p

P3
Gross profit is the total amount of revenue when the cost of sales is deducted.
Net profit is the amount left when the operating expenses are subtracted from the gross profit amount.

M1

The cost, revenue and profit are the most important elements when the business operates on the market.
The costs of the business are all variable and fixed costs added together. The total costs will obviously increase when the new services or a new products are available on the market when the business expands.
Revenue is the income which business makes from selling products or provide services. Simply to calculate the revenue you take the amount of sold times the price of product or service. Businesses want to increase profit so they need to make as much revenue as possible and to reduce the costs.
The main aim of most businesses is to make profit However, profit is calculated using total revenue and total costs. Therefore, businesses must consider the revenue along with the costs corresponding to the specific number of output in order to increase profit.

For a big company like JD Sports Plc the profit, the revenue and the cost are very important part of the business cycle.
The profit is used for paying dividends to the shareholders and covering the costs of the business. Also investments in the business are covered from the profit. JD Sports Plc. have opened 13 new stores this year which is from the big profit which they have.
They expect bigger revenue this year because of the new stores in different countries.
Using the right product sold in the right place at the right price, JD Sports have the chance to keep their revenue high. Obviously, they will try to minimise the costs of the products, but also have to keep the quality which is important for success. The price of the product on the market is also important and depends on a number of factors which are linked with the cost to make the product and the level of profit required. The right price is the key part for successful business and the price directly generates income, the cost might be paid, new...

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