Like-For-Like Sales
Categories: Accounting, Company Management
It’s time for our annual shareholder meeting, and here at Claire V. Oyant Enterprises, we couldn’t be more excited. Ouija board and tarot card retail sales nationwide are up 54%, psychic consultant service sales are up 67%, and as far as we’re concerned, the otherworldly skies are the limit. Our company is growing, and it feels so good.
“But Dr. Oyant,” someone pipes up, totally ruining our chill, “it says right here on the financial statements that total sales this year are only half of what they were last year. How can we say we’re growing when our sales numbers are down?” “Puh-lease, brochacho,” we reply with a roll of the eyes. “Everybody knows we’re only supposed to compare like-for-like sales when looking at overall revenue growth trends.”
Like-for-like sales are just what they sound like: they’re sales of items that are like, or comparable. So we compare this year’s retail sales to last year’s retail sales, and this year's consultancy sales to last year’s consultancy sales. We don’t take into account unusual or one-off transactions that artificially inflate or deflate our overall sales numbers. And since we sold our subsidiary publishing company last year—their books were nothing but a bunch of hooey anyway—our total sales figure for the year looks a little inflated, even though, in reality, our product sales revenue is much higher this year.
Comparing like-for-like sales is also useful because it can help us see how various sectors of our business are doing. (That’s how we knew we needed to ditch the publishing company.) For example, if all of our stores in major metro areas are underperforming, we can start looking at the effect of population size and other factors on the success of our retail locations. But so far, it looks like no matter where the location is, business is booming. Who could have predicted that? Oh yeah—we could.
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Finance: What is forecasting?8 Views
Finance allah shmoop what is forecasting one better than three
casting Okay so forecasting in a financial sense isn't all
that different from the crazed witchy ramblings of a medium
in a say aunts divine ing your future dating life
not necessarily on tinder which she and tones will be
cloudy with a chance of rejection Our company's forecast future
revenues and profits as driven by sales volumes and usually
and the pricing of whatever products they're moving out the
door Why like why bother Well you sell so many
units of your product what can you do about it
Well in practice there's plenty you can do about it
Let's say you won huge discounts and extruded plastic volumes
for your sneeze guard business The snot thickens any way
at all that you get in return for ordering five
years supply Your supplier loved knowing well in advance what
the demand would be for their extruded plastic so that
it could negotiate with its unions It's plastic mining contracts
its natural gas supplier teo melt the plastic and so
on So in return for a lot of commitment came
a lot of discounting You've now committed to buy five
years worth of extruded plastic supplies no matter what Like
twenty five tons this year thirty tons next thirty five
the next and so on But after year to the
economy softens and buffets have decided to cave to the
germs They aren't just buying enough sneeze guards Toe warrant
your commitment of thirty five tons of extruded plastic Well
what can you dio a cry Yes you always do
that Be wine and blame washington That's a good one
that always works Or see Spend money on marketing and
discounting to just quote get through it unquote So yeah
the answer to see you're on the hook for thirty
five tons no matter what So rather than have it
just pile up in the back of a factory you
lower prices and spend a bit more on marketing And
instead of only needing a twenty seven tons that the
existing market would have had you send out the door
you stimulated demand Five tonnes worth They now have thirty
two tons needed Teo get sent out for snot guards
and yes that three tons less And you really wanted
to sell But it's not terrible You don't go bankrupt
in three tons of plastic fits right here in the
back of the factory yard Thing neither Yeah that stuff
is heavy So through forecasting which letyou know very early
the softness in the market demand for your sneeze guards
you were able to stave off what could have been
a calamitous slow down or even shutdown bankruptcy or whatever
in production Yeah and that's nothing to sneeze at Gross