Edexcel Business A Level Revision

Whilst budgets are widely used to in business, you should appreciate that they have some important limitations. In particular: Budgets are only as good as the data being used to create them . Inaccurate or unreasonable assumptions can quickly make a budget unrealistic Budgets can lead to inflexibility in decision-making Budgets need to be changed as circumstances change , for example sales figures can be affected by many variables in demand such as changes in tastes, the actions of a competitor and so on. Budgeting is a time consuming process – in large businesses, whole departments are sometimes dedicated to budget setting and control. This has an associated OPPORTUNITY COST Budgets can result in short term decisions to keep within the budget rather than the right long term decision which exceeds the budget Managers can become too preoccupied with setting and reviewing budgets and forgetting to focus on the real issues of winning customers Costs covere...

Inflation - A sustained increase in the general level of prices within an economy, there is a fall in the value of money. It is measured by recording price changes for a wide range of goods and services likely to be bought by average families. Consumer price index - A measure that examines the weighted average of prices of a basket of consumer good/ services. Disinflation - This is when a lower inflation rate causes prices to rise more slowly Deflation - A decline in the general price level in an economy, characterised by an inflation rate that is lower than 0% Hyperinflation - A period of very high inflation rates, usually leading to a loss of confidence in an economy's currency Inflation rate - The annual rate of change of the average price of goods and services   Inflation can be a serious problem. it creates uncertainty and instability because it is hard to know whether it will accelerate or slow down.  It is measured by the annual percentage change in consume...