Level 2 Btec Diploma in BusinessUnit 3: Financial Forecasting for Business

Unit 3Financial Forecasting for Business (5 Credits)

Assessment Sheet

Name:………………………………………………………………………………

Assessment Criteria / Achieved
Pass 1 / Identify the difference between start up and operating costs, variable costs and fixed costs
Pass 2 / Identify the different types of revenue
Pass 3 / Outline the differences between gross and net profit
Pass 4 / Calculate the break even using given data to show the level at which income equals expenditure
Pass 5 / Present the break even as an annotated graph showing break even
Pass 6 / Prepare an annual cash flow forecast using monthly data
Merit 1 / Explain the importance of costs, revenue and profit for a business organisation
Merit 2 / Demonstrate the impact of changing cost and revenue data on the break even point of a selected business
Merit 3 / Analyse the implications of regular and irregular cash inflows and outflows for a business organisation
Distinction 1 / Evaluate the importance of cash flow and break even for the effective management of business finance
P1 / M1 / D1 / Points per credit (x 5 credits)
P2
P3 / Pass / Merit / Distinction
P4
P5 / M2 / Level 2 / 5 / 6 / 7
P6 / M3

Final Grade Conversion Table:

Pass / Merit / Distinction / Distinction*
L2 Certificate
(1 GCSE) / 75-84 / 85-94 / 95-99 / 100+
L2 Extended Certificate
(2 GCSEs) / 150-169 / 170-189 / 190-199 / 200+
L2 Diploma
(4 GCSEs) / 300-339 / 340-379 / 380-399 / 400+

Overall Grade:Pass /Merit/Distinction

Deadline: 21/10/11

In submitting your work for assessment, you are confirming that the work is your own. On completion of this unit, this document must be signed as a declaration that the work submitted is your own:

Assessor Signature: …………………Date: ………… Student Signature: ……………………………Date: …………

You have been employed by Max’s Cartoon Cakes as a financial adviser. Max has recently set up his own business and he has asked you to provide him with some information about financial forecasting. He has provided you with some information about the business so that you can advise him about the different types of costs he will incur, how he will calculate the gross and net profit he makes over the year, and what his break even point will be. He would also like some help with preparing a monthly cash flow forecast.

BUSINESS COSTS

Task 1

You have been asked to prepare a presentation for Max, explaining the different types of costs there are when running a business and the difference between gross and net profit. Using the data provided, design some Powerpoint slides which include:

a)

  • An explanation of the difference between start up and running costs(P1)
  • An explanation of the difference between variable and fixed costs that Max will incur (P1)
  • An explanation about why it is important for Max to record his business costs (M1)

This task provides evidence for P1 and M1

b)

  • An explanation of the different types of revenue Max may receive (P2)
  • An explanation about why revenue is important to Max’s business (M1)

This task provides evidence for P2 and M1

c)

  • An explanation of the difference between gross and net profit (P3)
  • The gross and net profit that Max made in the last financial year (P3)
  • An explanation about why it is important for Max to calculate the gross and net profit each year (M1)

This task provides evidence for P3 and M1

Submission date:23/09/11

BREAK EVEN

Task 2

Max has heard other local entrepreneurs talking about their break even point. He is interested to know what this is and how it can help him improve business efficiency.

a)

Using the data provided:

  • Explain what break even is and why Max needs to calculate the break even point (P4)
  • Use the breakeven formula to calculate the break even point at which income equals expenditure – show your calculations (P4)
  • Present the break even point on an annotated graph – the graph must show the break even point, the profit and loss, and the margin of safety (P5)

This task provides evidence for P4 and P5

b)

Max would like you to show what would happen to his break even point if his costs and revenue change. Using the data provided, show:

i)what would happen to the break even point if his fixed costs increased

ii)what would happen to the break even point if his variable costs increased

iii)what would happen to the break even point if his revenue increased

Write a report explaining what you did when you changed these variables and what the new break even points are. Also explain what action Max could take if the break even point was lower than he would like.

This task provides evidence for M2

Submission date:07/10/11

CASH FLOW FORECAST

Task 3

a)

Max is finding it difficult to keep a track of his monthly finances. Using the data provided, produce a pack of information for Max which includes:

  • An individually designed 12-month cash flow forecast (this must show the periods where cash outflows exceed cash inflows)
  • A sheet explaining the headings on the cash flow forecast

This task provides evidence for P6

b)

Add to the pack of information, a report that explains:

  • The impact of the periods of negative cash flow on the success of Max’s business.
  • The possible implications of long periods of negative cash flow
  • The action Max could take to improve his cash flow position

This task provides evidence for M3

Submission date:14/10/11

THE IMPORTANCE OF CASH FLOW AND BREAK EVEN

Task 4

4a) Max has realised that knowing about cash flow and break even are important aspects to the success of his business idea. Add some final information into your booklet that includes:

  • A full explanation of the benefits and limitations of using a cash flow forecast
  • A full explanation of the benefits and limitations of using break even
  • An overall recommendation from you as to whether or not Max should continue to use a cash flow forecast and break even

This task provides evidence for D1

Final date for submission is:21/10/11

Assessment and Feedback Record

Name:…………………………………………………………………

Interim Deadline 1:Task 123/09/11

Interim Deadline 2:Task 214/10/11

Final Deadline:All tasks21/10/11

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