2.3 managing finance
- Created by: taylorgargett
- Created on: 26-04-19 13:10
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- profit
- managing finance 2.3
- liquidity
- no current assets e.g property or equipment
- non-current liabilities; long term borrowings not expected to be paid back within the next year, money set aside for future expenditures
- current assets e.g trade inventories, cash, stock, raw materials
- current liabilities:expected to be paid in the trading year, short term loans and overdrafts
- means the ability for a business to turn their assets into cash
- indicates the ability to pay off debts, see what resources they have, measured by current ratio and acid tests(harsher)
- ways to improve liquidity; reduce the stock they hold,pay suppliers later on agreed terms, increase long term borrowing
- indicates the ability to pay off debts, see what resources they have, measured by current ratio and acid tests(harsher)
- no current assets e.g property or equipment
- business failure
- financial reasons
- poor cash flow, lack of funds to pay tax bills, lack of capital leading to excessive borrowing
- poor working capital management;measure of efficiency comparing a businesses liabilities to its assets
- poor cash flow, lack of funds to pay tax bills, lack of capital leading to excessive borrowing
- non financial factors
- poor marketing, failure to innovate, lack of efficiency, intense competition, government policies, natural disasters
- strong pound; heavily exporting means goods are more expensive abroad,
- poor marketing, failure to innovate, lack of efficiency, intense competition, government policies, natural disasters
- financial reasons
- liquidity
- gross profit
- sales revenue- direct or variable costs-known costs of sales
- ways to improve profitability
- increase revenue
- raise profits
- demand may fall if the product is price elastic
- lower costs
- outsource
- redundancies
- upgrade machinery
- buy cheaper raw materials
- increase revenue
- distinction between profit and cash
- profit is recorded straight away, can trade for years without profit, to improve a business can increase revenue or reduce their costs
- cash is not recorded until payed out/received, business will go bust if they run out of cash to pay wages, doesn't affect profit figure
- managing finance 2.3
- operating profit
- sales revenue- other operating expenses(rent,wages)
- profit
- managing finance 2.3
- liquidity
- no current assets e.g property or equipment
- non-current liabilities; long term borrowings not expected to be paid back within the next year, money set aside for future expenditures
- current assets e.g trade inventories, cash, stock, raw materials
- current liabilities:expected to be paid in the trading year, short term loans and overdrafts
- means the ability for a business to turn their assets into cash
- indicates the ability to pay off debts, see what resources they have, measured by current ratio and acid tests(harsher)
- ways to improve liquidity; reduce the stock they hold,pay suppliers later on agreed terms, increase long term borrowing
- indicates the ability to pay off debts, see what resources they have, measured by current ratio and acid tests(harsher)
- no current assets e.g property or equipment
- business failure
- financial reasons
- poor cash flow, lack of funds to pay tax bills, lack of capital leading to excessive borrowing
- poor working capital management;measure of efficiency comparing a businesses liabilities to its assets
- poor cash flow, lack of funds to pay tax bills, lack of capital leading to excessive borrowing
- non financial factors
- poor marketing, failure to innovate, lack of efficiency, intense competition, government policies, natural disasters
- strong pound; heavily exporting means goods are more expensive abroad,
- poor marketing, failure to innovate, lack of efficiency, intense competition, government policies, natural disasters
- financial reasons
- liquidity
- gross profit
- sales revenue- direct or variable costs-known costs of sales
- ways to improve profitability
- increase revenue
- raise profits
- demand may fall if the product is price elastic
- lower costs
- outsource
- redundancies
- upgrade machinery
- buy cheaper raw materials
- increase revenue
- distinction between profit and cash
- profit is recorded straight away, can trade for years without profit, to improve a business can increase revenue or reduce their costs
- cash is not recorded until payed out/received, business will go bust if they run out of cash to pay wages, doesn't affect profit figure
- managing finance 2.3
- net profit (year profit)
- whole business-interest on loans/taxes
- balance sheets
- documents showing what a business owns (assets) and what it owes (liabilities)
- shows what the business is worth in that moment in time and shareholders use this to judge the performance
- shows how they sourced their funds and by law has to be published
- cons;value of assets won't be what they sell for, values change quickly in a dynamic market
- pros;summary of business value, evaluates performance, helps investors
- equity-money owed to shareholders
- Ordinary shares; money paid by shareholders when originally issued Share premium;difference between share price and normal value Accumulated losses;losses from previous years and decreased equity
- working capital- funds the business has to pay off day-to-day expenses
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