Financial planning and monitoring
- Created by: Tiabarkerhall
- Created on: 12-05-15 20:25
Topic 1
Key terms
Finacial management- is the prices of producing and interpreting accounts that record a business expected or actual costs reveneues andf profits this helps managers to take good decisions.
Costs- are the expenses paid by a business such as its employees wages.
Revenue- is the income received by a buinsess from selling goods and services
A budget- is a finaical plan for the future operations of the business. budget are used to set tafrrs to monitors performace and control operations
A business plan- is a detailed statement setting out the propals for a new business or decriving the wasy in which an exisitng business will be developed
Cash flow- is a measure of the amount of money moving into and out of a business over some time period
A sole trader- is a business owned and operated by a single person.
A partnership- is a group between 2 to 20 people who contribute captial and expertise to an enterprise.
A company- is any incoporated business.
Shareholders- are the owners of a company
Limitied liability- provides protections for the owners of a company (normal the shareholders) they only risk the amount they have invested in the business in the event of its failure.
Topic 2
Key terms
An internal source of finance- is one that exists within the business
An external source of finance-is an injections of captial into a business from individuals, other business or financial instituations
A share- is a documenty representing part ownership of a comapny
Assets- are anything owned by a business from which it can benefit. Assests include land,vehicles stock and brand names
Trade credit- is a period of grace offered by suppliers before payment for goods and services is due
Collateral- is the secruity offered to back up a request for a loan. usually this is the form of property as this is a unlikely to lose value
Topic 3
Key terms
A business plan- is a detailed statement setting out the proposals for a new business or describinng the ways in which an exisitng business will be developed
Marketing- is the management process that identifies, anticiapates and suppliers customers requirements effieciently and profitably
Business objectives- are the targets or goals of the entire organisation
Profit- measures the amount by which revenue recieved from selling a product exceed the total costs involved in supplying it over some time period
Cash flow- is a measure of the amount of money moving into and out of a business over some time period
Topic 4
Key terms
Human resources- are the people who work within an organisation including office staff, operational and shop floor employees and managers.
Physical resources- are an organisations fixed assests such as premises are vehicles as well as tangiable items such as stocks of raw materials, components and finished goods
Finacial resources- are a business cas and captial resources an assessent of a business fincial resources involves examining profits and profitability as well as cash flows and working capaital requirements and company financing that is loans, share captial and reserves
Allocative efficiency- is the process of distributing resources effectively so that the minimum number of resources are in the right place at the right time.
Topic 5
Key terms
Fixed costs- are costs that do not vary with the level of output. fixed costs exist even if a business is not producing any goods or service.
Variable costs- vary directly with output. they include labour fuel and raw materials
Total costs- is the sum of fixed and variable costs
Semi- variable costs- are expenses incurred by a business that have fixed and variable elements
Revenue- is the income a business earns from selling its goods and services
Topic 6
Key terms
Profit- arises when a firms revenue is greater than its total costs. a low occurs when the revenue is less than a firms total costs
Revenue- is the income a business earns from selling its goods and services
Fixed costs- are costs thta do not vary with the level of output. fixed costs exist even if a business is not producing any goods of services
Variable costs- vary directly with output. they include labour feul and raw materials
Breakeven- is the point at which a business sells exactly the right number of products so that its revenue equals its cosrs in other works at breakeven the buiness makes no profit but also incurs no loss.
Margin of safety- is the amount of current output exceeds the amount necessary to break even
Topic 7
Key terms
Cash flow- is the money that enters and keaves a business as it makes and receives payments
Cash flow forecast- are detailed estimates of when and how cash is expected to flow into and out of a business
Cash inflows- are money recieved by a business from sales investments or loans
Cash out flows- are money that leaves a business through paying for wages, materials, marketing, fixed assets etc
Topic 8
Key terms
Trade credit- is an arrangment in which suppliers allow customer a period of time (usually one or two months) to pay their bills
Overtrading- occurs when a firm expands too rapdily without having the cash resources in place to adequately finance the expansion and meet its day to day commitments as well
Working captial- is the excess of current assests over current liabilities
Topic 9
Key terms
A budget- is a finanical plan for the future operations of the business. budgets are used to set targets to monitor performace and control operations
Variance analysis- is one of the methods used to monitor company perforamce. it is the comparison of what actually happened with what the business budgeted (actually planned)
An adverse variance- occurs when the busuiness actual results are worse than those anticpated and planned for the budget
A favourable variance- occurs when the actual results are better than thoise anticpated and planned for in the budget
Calculations
Business costs
Profit= revenue - total costs
Total costs
Total costs= Fixed costs + Variable costs
Revenue = Quanity sold x average selling price
Calculating breakeven
Breakeven point= total fixed costs divided by selling price - variable costs per unit
(1) total cash inflow
(2) total cash outflow
(3) opening bank balance
(4) net cash flow (1-2)
(5) closing bank balance (3+4)
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