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Importance of Sales Forecasts Essay
Financial planning process can be defined as an act of developing long-term strategic financial plans that helps in preparation of the short term budgets and plans.
Financial planning is one of most important aspects of business operations since it provides guidance to the firm in meeting its objectives (Kamis, 2010). In every organization, the sales forecasts are very vital in the process of long-term financial planning.
Leach and Melicher observed that long-term financial planning begins with a forecast of sales.
One of the main reasons for Sales in long term financial planning is that if sales fall below the predicted levels, the company may be unable to meet its financial obligations.
It is therefore very important to have accurate sales forecasts to avoid future inconveniences. This is demonstrated by the cases described below.
The importance of forecast of sales can be clearly demonstrated in the case of Picnic Corp. In this case the Securities and Exchange Commission had ordered Picnic Corp Plc to amend its first quarter financial statements because it did not set aside for provision for doubtful accounts (Thai Press Reports, 2006).
The firm had not established a reserve for Bt432 million in outstanding receivables. The firm did not make correct forecasts. Poor forecasts led the firm into difficulties. It is also observed that the firm made a net loss of Bt 381.77 million.
Another case that can demonstrate the importance of forecast of sales in an organization is the case of Boston Chicken Inc. This firm was one of the most successful firms in 1990s (LTFPG, 2010, 1). My homework help reviews However, the organization later went under bankruptcy due to unexpected high rate of growth.
The firm had added its restaurants in 1993 due to an increase in sales from $42.5 million in 1993 to 462.4 million in 1997 (LTFPG, 2010, 1).
The organization had not managed to predict this increase in sales earlier enough. Therefore, this high rate of growth turned into a menace. The firm started building additional stores to meet the demand. However, these expenses led the firm into bankruptcy (LTFPG, 2010, 1).
This story indicates one of the importances of sales-forecast on financial planning.
In conclusion, the above discussion has confirmed that sales-forecasts are very important in the financial planning. The ability of an organization to meet its objectives will largely be determined by its financial planning.
It is therefore very important to have accurate sales forecast in order to meet organizational goals and objectives easily.
International Business Portfolio Essay 2
Diversification internationally will reduce the risk faced by a given return provided the correlation coefficient existing between the domestic and the foreign market is below one (i.e., less than 100 percent).
Reduction in future correlation will lead to deeper risk reduction. Based on our results, a U.S. investor having a portfolio of U.S. stocks will face a little diversification benefit (risk reduction) by investing in Canada stocks since the cross correlation coefficients with the Canada market are rather large. My homework help reviews
On the other hand, the same U.S. investor will have improved diversification benefit through investing in the Japanese market (Yuvas).
The same is true for a Canada investor. This is so because a Germany-Japan interrelation will bring about a better diversification than Germany-U.S. interconnection can. Similarly, investors in Japan will equally achieve desirable diversification of portfolio benefits if they invest in the U.S or Canada.
I would really recommend that in accordance to two well-known theories in the finance literature, the Capital Asset Pricing Model (CAPM) and the Modern Portfolio Theory (MPT), which suggest that individual and institutional investors should hold a well-diversified portfolio to reduce risk.
An institutional investor can realize a well-balanced portfolio due to the amount of funds in the portfolio is large enough for in-house diversification. My homework help reviews
Individual investors with limited affluence will have to find another way that does not require substantial funds to diversify their portfolios. Mutual funds can also offer a quick and somewhat inexpensive method to diversify for small investors and others.
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