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Higher Business Management > Finance > Flashcards

Flashcards in Finance Deck (15)
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1

Name 7 short term sources of finance

Owners personal finance
Retained profits
Sale of assets
Sell and lease back
Bank overdraft
Trade credit
Debt factoring

2

Name 9 long term sources of finance

Share issue
Debentures
Grants
Bank loan
Leasing
Hire purchase
Mortgage
Venture capital
Business angels

3

Name factors affecting sources of finance

Short/long term
Interest rates
Payback term
Size and type of organisation
Previous credit history

4

Name users of financial statements

Owners
Employees
HMRC
Trades unions
Competitors
Investors
Lenders

5

Trading profit and loss

Revenue:- money from sales
Cost of sales: money spent on sales
Gross profit: revenue – cost of sales
Expenses: running costs
Net profit: gross profit – expenses

6

Balance Sheet

Fixed assets: items owned for more than 1 year
Current assets: items owned for less than 1 year.
Current liabilities: items owed for less than 1 year
Working capital: current assets- current liabilities
Total net assets: fixed assets + working capital
Financed by: how business has been financed

7

Name solutions to cash flow problems

Use JIT
Sell off excess stock
Offer discount for cust to pay cash
Charge interest on credit sales
Switch suppliers to interest free credit
Pay for fixed assets in instalments ie hp
Reduce expenses
Adapt marketing mix to increase sales
Sell debts to factoring co.

8

Issues for cash flow

Too much money in stock
Too many credit sales
Too long payment for credit sales
Not enough credit purchases
Spending on fixed assets
Increasing expenses
Too many drawings by owners
Not enough sales revenues
Too many unpaid debts

9

Uses for a cash budget

Predict positive cash flow
Predict negative cash flow
Allow and plan investment
Action to prevent a deficit
Compare actual to measure performance

10

Uses of ratios

Compare performance with previous years
Compare performance with competitors
Compare industry averages
Highlight areas needing attention
Highlight trends for decision making

11

Limitations of ratios

Historical not relevant to future
No account of PESTEC
No account of internal factors
No account of product development
Comparisons hard as no businesses are exactly the same

12

Profitability Ratios

Gross profit %age : GP/revenue X 100

Net profit %age: NP/revenue X 100
ROCE: profit/ capital X 100

13

Liquidity ratios

Current Ratio: current assets/current liabilities

Acid test ratio: (current assets- closing stock)/ current liabilities

14

Efficiency

Stock turnover=cost
of sales/ av stock

15

Name technology in finance

Spreadsheets
Presentation sw
E mail
On line banking
On line payment