Progress Check 2 - Managing Money, Business Cycle, Sources of Help & Advice Flashcards
(34 cards)
What are incomings?
Money earned/received by a business
What are outgoings?
Money paid out of or spent by a business
Uses of incoming/outgoing sheet?
Identify excess money for supporting new projects
Spotting and solving cash flow problems
Solution to falling sales?
Change/diversify product portfolio
Reduce price/have a sale (special promotion)
Increase adverts/sell in new area
Solution to increasing costs/expenses
- Find cheaper supplier
- Lower the wages
- Less Overtime
- Lower the rent/utilities
- Avoid single large purchases
What is a cash flow statement?
Monitoring documents that records the actual money going into and out of a business on a monthly basis
What is a cash flow forecast?
Planning document that looks at potential money that may come into a business
What is a monitoring document?
Allows business to check if plans are effective
What is a break-even chart?
A tool to identify the number of items necessary to be sold to cover all costs and stop making a loss.
Pros and Cons of Increasing selling price
Pros - Fewer units to sell
Cons - Loss of customer loyalty and customers moving to competition
Risk of lowering your variable costs
- Lower quality
- Lower Reputation
- Lower sales
- More complaints
Risk of lowering fixed costs
Lose employees
Difficult to maintain image
What is an income statement?
Shows profit and loss of an organisation over a period of time
What are variable costs?
Any costs directly linked to the item sold (e.g. raw materials)
What are fixed costs?
Costs paid regardless of sales e.g rent, wages, insurance etc.
Parts of Income statement
- Trading Account
- Profit-and-loss account
- Appropriation Account
What is Gross profit?
Money earned before subtracting fixed costs or expenses
Use of calculating gross profit
You can decide the price of your and items and decide if you are paying too much for your raw materials
What is Net profit?
Gross profit - Expenses (fixed costs)
OR
Actual money earned before tax
How to increase gross profit?
Increase price of items
OR
Lower cost of raw materials
What does an Appropriation account do?
Shows how net profit is used
-Shareholder dividend
-Bonuses
-Tax
-Retained profits for new projects
What is a grant?
Large sum of money paid into a business that doesn’t need to be repaid but requires certain criteria to be paid.
The cycle of business
- Businesses produce goods and services to meet customers needs/wants
- Customers buy goods/services to satisfy their needs/wants
- Wealth is created for businesses, their employees, & owners
- Customers have money to spend from their wages and want other goods/services
What happens in inflation?
Prices rise because demand is high and supply is low
