Finance Flashcards
(9 cards)
Identify what the finance department is responsible for in a business
Payment of wages, payment of accounts and preparation of internal and external financial documents
Identify sources of finance for businesses
Owners funds, retained profits, bank overdraft, loans, government grants, hiring and leasing, sell shares, sell assets, venture capital, factoring and trade credit
What factors do businesses have to take into consideration when choosing a source of finance
Length of time the money is needed for, amount required, amount of interest having to be paid back, risk involved, advice available and whether or not owner will lose control of business
Outline what fixed costs and variable costs are
Fixed costs- costs which stay the same regardless of units produced or sold
Variable costs- costs which change depending on amount of units being produced
Identify the advantages and disadvantages of a break even analysis
Advantages- can see at a glance how many units have to be sold to make a profit, can see they amount of profit or loss made at different levels of output and can aid decision making
Disadvantages- difficult to use if business sells more than one product, assumes that all units being produced are sold and doesn’t take change in wages or prices into consideration
Identify the reasons for cash flow problems
Spending too much money on stock that has not been sold, giving customers too long to pay debts, not receiving enough time to pay bills from suppliers and owner taking out too much
Identify ways to improve cash flow problems
Reduce costs, increase selling price, increase sales, find a cheaper supplier, raise extra capital, take out a loan, arrange a over draft in advance, tight credit control and spread purchase costs
Define gross profit and net profit
Gross Profit is the cost of sales taken away from the sales. Net profit is when the expenses are taken away from the gross profit.
Identify how technology is used in finance
Spread sheet can be used to calculate profits, prepare cash budget and calculate break even.
