Unit 3 Task Sheet – Level 2 –

Financial Forecasting For Business

Unit code: K/502/5252

QCF Level 2: BTEC First

Credit value: 5

Guided learning hours: 30

Student Name:

Form:

Teacher Name: Date assignment received by Final Deadline for the whole
Mr Ioannou student/school stamp assignment

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Aim and purpose

The aim of this unit is enable you to understand the financial aspects
of running a business. You will do this through looking at the key
concepts used by businesses to manage their money, and forecast
their finances for the future.

Unit introduction
Money is at the heart of business. It is likely to be the main reason why
a business was created and for it continuing to trade. This unit looks at
the financial aspects of running a business.

You will be introduced to the types of costs that different businesses

will incur. This is followed by exploring how the sale of products and
services generates revenue and develop your understanding of profit.

The awareness of profit leads the you into the concept of break-even
analysis, a technique used to determine the point at which sales equal
costs. It establishes the volume of sales at which fixed and variable
costs will be covered.

All sales over the breakeven point produce profits; any drop in sales
below that point will produce losses. The unit will then introduce you to
the concept of cash flow forecasting, which estimates the timing and
amounts of cash inflows and outflows over a specific period (usually
one year). A cash flow forecast shows if a business needs to borrow,
how and when a decision will be needed. This is followed by exploring
how cash flows can be managed more effectively and you will gain an
insight into one of the primary causes of business failure – the problem
of payment timing rather than that of profitability alone.

The knowledge and skills developed in this unit are essential for
anyone running a small business venture or involved in the financial
management of business organisations. You will develop vocational
skills, knowledge and techniques through simulating the kinds of tasks
that a real business would be expected to complete to ensure it
manages its finances successfully.

Learning outcomes

On completion of this unit a learner should:

1 Know about costs, revenue and profit in a business organization

2 Be able to prepare a break-even analysis

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3 Be able to create a cash flow forecast.

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Indicative reading for learners
Textbook
Carysforth C, Neild M and Richards C – BTEC Level 2 First Business
Student Book (Pearson, 2009) ISBN 9781846906206

Carysforth C, Neild M and Richards C – BTEC Level 2 First Business

Teaching Resource Pack (Pearson, 2009) ISBN 9781846906213

Anderton A – GCSE Business Studies (Causeway Press, 2001) ISBN

1902796292
Carysforth C and Neild M – BTEC First Business, 2nd Edition
(Heinemann, 2006) ISBN 0435499076

Fardon M, Nuttall C and Prokopiw J – GCSE Applied Business (Osborne

Books, 2002) ISBN 1872962327

Wales J and Wall N – Nuffield – BP Business and Economics for GCSE,

2nd Edition (Collins, 2001) ISBN 000711639X

Journal

Business Review

Websites

www.bized.co.uk A business education resource site

www.thetimes100.co.uk The Times 100 business studies resource
centre
www.tutor2u.net Tutor2U Resources and revision materials
Anderson A, Barker D and Critten P – Effective Self Development – A
Skills and Activity based Approach
(Blackwell, 1996) ISBN 0631200150

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Unit content

1 Know about costs, revenue and profit in a business

organization

Business costs: costs incurred at start up; operating costs (fixed, indirect,
variable, direct costs, total costs)

Revenue: sources of revenue eg sales, leasing interest; calculating total

revenue (unit sales price x number
of units sold)

Calculating gross and net profit: revenue (income) minus costs

(expenditure), cost of sales, expenses (operating costs); maximising
profits (increasing revenue

2 Be able to prepare a break-even analysis

Break even: balancing costs or expenditure with revenues or income;

areas of profit and loss; margin of safety; methods of presenting
graphically

3 Be able to create a cash flow forecast

Cash inflow: capital; sales; loans; regular and irregular inflows; timing of
inflows

Cash outflows: purchases; loan repayments; wages; regular and irregular

outflows; timing of outflows

Cash balances: opening balance; closing balance; income per period;

expenditure per period

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 First Name: Family Name:

To achieve a pass grade the
evidence must show that the
learner is able to meet:
To achieve a merit grade
the evidence must show
that in addition to the pass
criteria the learner is able
to meet:
To achieve a distinction grade
the evidence must show that in
addition to the pass and merit
criteria the learner is able to
meet:

P1
Identify the difference between
start up, and operating costs,
variable and fixed costs. (TW)
P2
Identify the different types of
revenue. (TW, CT)
P3
Outline the difference between
gross and net profit.
P4
Calculate break even using
given data to show the level at
which income equals
expenditure.
P5
Present the break even as an
annotated graph showing
breakeven.
P6
Prepare an annual cash flow
forecast using monthly data.
(IE).
M1 D1
Explain the importance of Evaluate the importance of cash
costs, revenue and profit flow and break even for the
for a business organisation. effective management of
business finance (IE)
M2
Demonstrate the impact of
changing cost and revenue
data on the break even
point of a selected business.
M3
Analyse the implications of
regular and irregular cash
inflows and outflows for a
business organisation

PLTS: This summary references where applicable, in the square brackets, the
elements of the personal, learning and thinking skills applicable in the pass criteria.

IE – independent enquirers RL – reflective learners SM – self-managers

KEY CT – creative thinkers TW – team workers EP – effective
participators

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Record of textbooks used Date Used Record of topic it was for.
include title and author Refer to Unit Content

Record of Journals used Date Used Record of topic it was for.

Include title and author Refer to Unit Content

Record of Newspapers used Date Used Record of topic it was for.

Include title and author Refer to Unit Content

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First Name: Family Name:
Assignment Received: Assignment Due:

Assignment One
Analysis of Costs Revenue and Profit

P1
Identify the difference between start up, and operating costs, variable and fixed costs. (TW)

a) Create a spider diagram describing at least 12 different business costs that any business
may incur.

b) Explain the difference between operating and start up costs

c) Copy and complete the table below by identifying whether the costs stated in (a) are
start up costs or running costs.

Cost Start up cost Running Cost

1
2
3
4
5
6
7
8

d) Using examples from (a) complete the table below to identify whether the costs are
fixed or variable

Cost Fixed Variable

1
2
3
4
5
6
7
8

e) Create a collage of fixed and variable costs.

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 P2
Identify the different types of revenue. (TW, CT)

a) Why is revenue important to a business?

b) Businesses have many ways in generating revenue, list 5 ways and explain them

P3
Outline the difference between gross and net profit.

a) Using the information provided complete the chart

Sales revenue £1,500,000 Marketing £100,000 Insurance £25,000
Cost of goods £600,000 Rent £100,000 Salaries £150,000
Rates £25,000

Profit and Loss Statement for:

Sales
Cost of
Sales
Gross
Profit

Expenses £

Total
Expenses
Net Profit

b) Explain the difference between Gross profit and Net Profit

c) Generate a series of questions to be used during the presentations regarding P1, P2,
and P3.

For P1, P2, and P3 you are expected to create a power point and present back to
the class. You will need to develop cue cards for your presentation and answer
questions from your peers 9
First Name: Family Name:
Assignment Received: Assignment Due:

Assignment Two
Break-Even Analysis
P4
Calculate break even using given data to show the level at which income equals expenditure.
a) Using the information provided complete the table.

Paul Sherry runs a driving school. The fixed costs of running the school include the
repayment of loans on the cars he owns and administration costs. He calculates these
to be £600 per week. The variable costs are the costs of labour and petrol. He
calculates these to be £25 per lesson. He charges £40 per lesson

Lessons per Sales Fixed Cost Variable Total Cost Profit/Loss

week Revenue cost
0
10
20
30
40
50
60
70
80
90
100
110
120

b) You are expected to generate a list of questions that could be asked to show knowledge
and understanding on the concept of break even.

c) You will be expected to answer a series of questions in a one-to-one meeting regarding

the
P5concept of break even.
Present the break even as an annotated graph showing breakeven.

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a) Using the information from P4 you are required to generate a graph with clear
labelling of the costs, revenues, profit, loss, margin of safety, and the break even point.

b) You are expected to explain each labelled point on the graph.

M1
Explain the importance of costs, revenue and profit for a business organisation

Paul Sherry feels that he does not have the mind set in establishing a successful business.
This is due to his lack of clarity of the effects and impact that cost, revenue and profit
have on a business. He would like you to create a PowerPoint presentation that you will
present in your next meeting.

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First Name: Family Name:
Assignment Received: Assignment Due:

Assignment Three
Cash-flow Analysis

P6
Prepare an annual cash flow forecast using monthly data. (IE).

Using the information below and template provided construct a cash flow forecast

You are the finance specialist for CY Holidays and you have been given the task of
forecasting 2011 cash flow. The revenue expected in 2011 is as follows, July and August
£20,000 per month, September, October, November, March and February £2,000 per
month. January, April and May £6,000 per month and December £10,000 and June
£4,000. The costs for this business are as follows £1,200 per month, Rates £1,800 per
quarter commencing in January. Salaries are £3,000 per month with a special purchase of
computer equipment in March.

M2
Demonstrate the impact of changing cost and revenue data on the break even point of a
selected business

CY Holidays has revised its forecast for the 2011, it is as follows:

The revenue expected in 2011 is as follows, July and August £30,000 per month,
September, October, November, March and February £4,000 per month. January, April
and May £6,000 per month and December £10,000 and June £4,000. The costs for this
business are as follows £1,200 per month, Rates £1,800 per quarter commencing in
January. Salaries are £4,000 per month with a huge marketing budget of £1,000 for five
months commencing in February.
a) Create a new cash flow forecast for CY Holidays.

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b) CY Holidays would like you to explain the impact of what has happened.

M3
Analyse the implications of regular and irregular cash inflows and outflows for a business
organisation

CY Holidays has revised its forecast for the 2011 again, it is as follows:
The revenue expected in 2011 is as follows, July and August £10,000 per month,
September, October, November, March and February £1,000 per month. January, April
and May £4,000 per month and December £10,000 and June £4,000. The costs for this
business are as follows £1,200 per month, Rates £1,800 per quarter commencing in
January. Salaries are £3,000 per month.

a) Create a new cash flow forecast for CY Holidays.

b) CY Holidays would like you to explain what has happened.

c) CY Holidays want to know the consequences of this predication with some solutions.

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First Name: Family Name:
Assignment Received: Assignment Due:

Assignment Four
The importance of Cash-flow and Break–even analysis for business management

D1
Evaluate the importance of cash flow and break even for the effective management of business finance
(IE)

CY Holidays are seeking your assistance one more time; they would like to know the
importance of effective cash-flow and Break-even on a business. They would like a
visual aid (poster) to use in a training seminar next week. Also they would like a letter
with your analysis so they can publish it on in their annual report to shareholders.

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