BU121 Lecture Notes - Lecture 10: Variable Cost, Accounts Payable, Sensitivity Analysis

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No formula projections based on research and logic = educated guess you can defend: no set answers. Top-down forecasting (breakdown: market potential not just #households. With lawns / likely to mow lawn / care about benefits. Think about who can you remove to make the market smaller but accurate: still doesn"t equal sales forecast. Bottom-up forecasting (buildup: what you can do given capacity and marketing plan. Sensitivity analysis and contingency plan once you have researched and found the numbers: assumptions to base sensitivity on. Capacity: milestone points that increase valuation of business. Idea in investors mind is maximum return (free cash flow! Not needed for something else discounted for risk) A company that is profitable can go bankrupt. Sales revenue might be accounts receivable and not physical cash: so profit is shown but cash is not there and creditors might force sell of assets.

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