Podcast
Questions and Answers
Explain why entrepreneurs may overestimate sales figures, drawing on psychological and practical factors.
Explain why entrepreneurs may overestimate sales figures, drawing on psychological and practical factors.
Entrepreneurs may overestimate sales due to optimism and confidence, leading them to expect favorable outcomes. Practically, they might struggle to analyze complex consumer data effectively, leading to inaccurate forecasts.
Describe two potential negative outcomes for a business that significantly overestimates its sales.
Describe two potential negative outcomes for a business that significantly overestimates its sales.
Overestimating sales can lead to excessive unsold stock and subsequent cash flow problems due to inadequate revenue generation.
Outline how inaccurate sales forecasts can create a deficit in a business's cash flow, be specific in your answer.
Outline how inaccurate sales forecasts can create a deficit in a business's cash flow, be specific in your answer.
If a business produces goods based on overestimated sales and these goods remain unsold, the money spent on production doesn't return, leading to a cash flow deficit. Too much cash flows out of the business relative to the amount flowing in.
What are some of the factors that make forecasting future sales very difficult?
What are some of the factors that make forecasting future sales very difficult?
How might a business mitigate the risk of cash flow problems if they've overestimated sales?
How might a business mitigate the risk of cash flow problems if they've overestimated sales?
Flashcards
Sales Forecasting
Sales Forecasting
Predicting future sales; a difficult process influenced by changing consumer tastes, data analysis challenges, and optimism.
Overestimating sales
Overestimating sales
Occurs when a business predicts higher sales than it actually achieves.
Unsold Stock
Unsold Stock
Excess inventory that has not been sold and can lead to cash flow problems.
Cash Flow Problems
Cash Flow Problems
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Consequences of Overestimation
Consequences of Overestimation
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Study Notes
- Forecasting future sales is a very difficult process
- Consumer tastes and preferences can change dramatically and quickly
- Analysing consumer behaviour and other sales factors can be difficult
- Entrepreneurs and business managers can be optimistic and overestimate sales
Consequences of Overestimating Sales
- Overestimating sales can lead to business failure
- Too much unsold stock build-up can occur
- Inadequate revenues can lead to cash flow problems
- Money flows out of the business instead of back in
- Businesses may run out of cash and collapse
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Description
Overestimating sales could lead to business failure due to unsold stock, cash flow issues, and inadequate revenue. Money may flow out of the business instead of back in. Businesses may run out of cash and collapse as a result.
