Unit 5 Finance
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- Created on: 15-11-21 21:50
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- Finance Unit 5
- 5.1 The role of the finance function
- The purpose of the finance function
- Provide financial information, support business planning and decision making
- The purpose of the finance function
- 5.2 Sources of finance
- The reasons businesses needs finance
- Establishing a new business, funding expansion, to run the business recruitment, marketing
- Ways of raising finance
- Loan, overdraft, trade credit, retained profit, sale of assets, owners’ capital, new partner, share issues, crowdfunding
- The reasons businesses needs finance
- 5.3 Revenue, costs, profit and loss
- The different costs in operating a business
- Fixed, variable, total
- Calculation of profit/loss
- Gross profit, net profit
- Calculation and interpretation of profitability ratios
- Gross profit margin, net profit margin
- Average Rate of Return .
- The different costs in operating a business
- 5.4 Break-even
- The concept of break-even
- The usefulness of break-even in business decision making
- Informs marketing and planning decisions
- Break even quantity = Fixed Cost / Selling price - Variable Cost
- Contribution per unit = Selling price - Variable Cost
- 5.5 Cash and cash flow
- The importance of cash to a business
- Providing liquidity, enables business to meet shortterm debts/expenses
- The usefulness of cash flow forecasting to a
business
- Planning tool, anticipates periods of cash shortage, enables remedies to be put in place for shortages, provides targets
- Net Cash flow = Total inflow - Total outflow.
- Closing Balance = Net cashflow + Opening Balance
- The importance of cash to a business
- 5.1 The role of the finance function
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