FPAP cheat sheet

FP&A: connect records, drivers, forecasts and a decision

• Connect profit, equity, cash and working capital.

• Model drivers and relevant ranges explicitly.

• A variance is a difference to explain, not proof of a cause.

• FPAP and FPAC share concepts without being the same credential.

• Cost of sales includes carriage inwards and excludes carriage outwards

• Closing inventory affects both the trading account and the balance sheet

• Drawings reduce capital and are never an expense

• An increase in the doubtful debts provision is charged to profit and loss

• Capital = opening capital + net profit − drawings

• Issued capital and actual cash received are different concepts.

• Share premium in the supplied par-value model is not sales revenue.

• Distinguish equity distributions from interest on liabilities.

• Prime cost includes direct materials consumed, direct labour and direct expenses

• Cost of production adds production overheads and adjusts for work in progress

• Selling and administration costs are not production costs

• Inventory is valued at the lower of cost and net realisable value

• Contribution = sales − variable costs; profit = contribution − fixed costs

• Break-even units = fixed costs ÷ contribution per unit

• Relevant costs are future, incremental and differ between alternatives

• Predetermined overhead rates use budgeted overheads and budgeted activity

• Cash budgets exclude depreciation but include capital expenditure

• A business model connects customer value, delivery, resources, costs and revenue; its assumptions require evidence.

• Porter's generic strategies require a clear basis for competitive advantage.

• Expected value weights outcomes by probability but ignores risk attitude.