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Importance of communication

Ensures information is shared quickly and accurately so employees understand objectives and work efficiently

Problems of poor communication

Leads to mistakes low motivation wasted time and conflict between staff

Internal communication

Communication within a business such as emails meetings or memos

External communication

Communication with people outside the business such as customers suppliers or investors

Verbal communication

Speaking face to face or by phone quick feedback but no record

Written communication

Emails letters or reports permanent record but slower feedback

Visual communication

Charts posters or videos easy to understand but may lack detail

IT communication methods

Emails websites video calls instant messaging are fast and low cost but risk of technical issues or data leaks

Barriers to communication

Things that prevent messages being understood such as noise language or poor technology

Physical barriers

Noisy offices poor layout or distance between departments

Language barriers

Using complex or unclear language or jargon

Attitudinal barriers

People ignoring messages or lacking motivation

How to remove communication barriers

Use clear language provide feedback choose correct method check understanding

Types of employment full-time

Working full working hours usually 35 to 40 hours a week with full benefits

Types of employment part-time

Working fewer hours per week offers flexibility but lower income

Job share

Two people share the duties of one full-time job improving work-life balance

Casual or temporary employment

Short-term or seasonal work such as during holidays less job security

Job description

Document describing duties responsibilities and hours of a job

Person specification

Lists skills qualifications and experience needed for a job

Application form

Form used to collect consistent information from applicants

Curriculum vitae CV

Summary of a person’s education skills and work experience

Internal recruitment

Filling a job with someone already employed saves cost and training time

External recruitment

Hiring from outside brings new ideas but is more expensive

Job advertisement

Public notice to attract applicants shows job title pay and requirements

Shortlisting

Selecting the best candidates from applications for interview

Interviewing

Face-to-face or online questions to assess a candidate’s suitability

Legal controls on employment

Laws that ensure fair treatment of workers

Equal opportunities law

Prevents discrimination by gender race disability religion sexual orientation or age

Minimum wage law

Sets the lowest pay allowed helping prevent worker exploitation

Need for finance short-term

To pay wages bills and suppliers

Need for finance long-term

To buy assets expand or develop new products

Internal sources of finance

Money from within the business such as savings retained profit or selling assets

Personal savings

Owner’s own money used to start a business no interest but limited funds

Retained profit

Profit kept in the business cheap but only available if profitable

Selling assets

Raising money by selling unused equipment or buildings

External sources of finance

Money from outside the business like banks or investors

Overdraft

Short-term borrowing from a bank flexible but expensive interest

Trade payables

Delaying payment to suppliers improves cash flow but risks bad relationships

Loan capital

Borrowed money repaid with interest provides large funds but increases risk

Share capital

Money from selling shares permanent capital but gives up ownership

Stock market flotation

Public limited company sells shares to the public raises large finance but costly

Venture capital

Money from investors seeking high returns provides expertise but loses some control

Crowdfunding

Collecting small investments online quick access but limited amounts

Importance of cash

Needed to pay suppliers wages and bills prevents insolvency

Difference between cash and profit

Cash is money available now profit is total revenue minus total costs

Cash inflow

Money coming into the business from sales or loans

Cash outflow

Money going out of the business to pay costs

Net cash flow

Cash inflow minus cash outflow shows if business has surplus or deficit

Opening balance

Cash held at the start of the period

Closing balance

Cash at end of period equals opening balance plus net cash flow

Revenue

Total income from selling goods or services price times quantity sold

Fixed costs

Costs that do not change with output like rent

Variable costs

Costs that change with output like raw materials

Total costs

Fixed costs plus variable costs

Profit

Revenue minus total costs

Break-even output

The number of units needed to cover all costs

Break-even formula

Fixed costs divided by contribution per unit

Contribution per unit

Price minus variable cost per unit

Effect of higher costs on break-even

Raises break-even output because profit margin is smaller

Effect of higher revenue on break-even

Lowers break-even output because profit per unit increases

Limitations of break-even chart

Assumes constant prices and costs not always realistic

Statement of comprehensive income

Shows revenue costs and profit for a period

Sales

Total income from goods or services sold

Cost of sales

Direct costs of producing goods such as materials

Gross profit

Sales minus cost of sales

Expenses

Indirect costs like wages rent and marketing

Operating profit

Gross profit minus expenses shows performance

Use of income statement

Helps managers decide on pricing cost control and investment

Importance of profit

Reward to owners source of finance and measure of success

Statement of financial position

Balance sheet showing assets liabilities and capital at a point in time

Current assets

Cash and items that will be used within a year such as stock

Non-current assets

Long-term assets like buildings or machinery

Current liabilities

Short-term debts due within one year

Non-current liabilities

Long-term debts such as bank loans

Capital employed

Total money invested in the business equals assets minus liabilities

Use of statement of financial position

Assesses financial strength and ability to repay debts

Gross profit margin formula

Gross profit divided by revenue times 100

Operating profit margin formula

Operating profit divided by revenue times 100

Markup formula

Gross profit divided by cost of sales times 100

Return on capital employed ROCE formula

Operating profit divided by capital employed times 100

Current ratio formula

Current assets divided by current liabilities

Acid test ratio formula

Current assets minus inventory divided by current liabilities

Meaning of liquidity

Ability of a business to pay short-term debts

Importance of liquidity

Without liquidity a business cannot meet payments and may fail

Comparison of liquidity

Helps judge performance against previous years or competitors

Use of financial documents

Analyse profitability liquidity and efficiency to inform decisions