Studied by 10 peoplebusiness (stakeholders and accounting info)
measure the performance of the business to compare against targets, previous time periods and competitors
providing information for making decisions such as new investments, closing branches and launching new products
control and monitor the operation of each department and division of a business
set targets or budgets for the future and review these against actual performance
banks (stakeholders and accounting info)
decide whether to lend to the business
assess whether to allow an increase in a line of credit (overdraft)
decide whether to continue a loan or line of credit
creditors such as suppliers (stakeholders and accounting info)
assess whether the business is secure and liquid enough to pay its debts
asses whether the company is a good credit risk
decide whether it should collect its outstanding debt early
government and tax authorities (stakeholders and accounting info)
calculate how much tax is due
determine whether the business is likely to expand and create more jobs
asses whether the business is in danger of closing down
confirm that the business is adhering to laws and accounting regulations
investors and potential investors (stakeholders and accounting info)
assess the value of their business and their investment in it
establish whether the business is becoming more or less profitable
determine what share of the profits the investors are receiving
decide whether the business has the potential for growth
as potential investors compare details to other businesses before making an investment decision
as actual investors, decide whether to consider selling all or parts of their holding
workforce (stakeholders and accounting info)
asses whether the business is secure enough to pay wages and salaries
determine whether the business is likely to expand or be reduced in size
determine whether jobs are secure
find out whether if profits are rising a wage increase can be afforded
find out how the average wage compares with the salaries paid to company executives
local community (stakeholders and accounting info)
see if the business is profitable and likely to expand which could be good for local economy
determine whether the business is making losses and whether this could lead to closure
limitations of accounting information
one set of accounts is of limited use
accounts do not measure items which cannot be expressed in monetary terms
the accounts of one business do not allow for comparisons
business accounts will only publish the minimum information required by law
accounts are historic
window dressing
financial statements
profit and loss account
balance sheet
sales
revenues generated by the business (aka sales turnover)
cost of sales (or cost of goods sold)
direct costs requires to produce the product to sell
cost of sales = opening stock + purchases - closing stock
gross profit
sales revenue less the cost of sales
gross profit = revenue - cost of goods sold
overheads or expenses
expenses not directly related to producing the item sold
assets
things the company owns
non-current assets
tangible items that will be retained and used by a business for at least 1 year. land, buildings machinery
current assets
items that are seen as liquid (easily converted to cash) such as inventory
liabilities
money the company owes
current liabilities
debts of the business that will usually have to be paid within one year. e.g. loans, short term debts
long-term liabilities
items that will take longer than one year to pay such as mortgages
working capital =
current assets - current liabilities
equity
money paid into company by shareholders and retained profits
different types of intangible assets
goodwill
copyright
patents
trademarks
profit before interest and tax =
gross profit - expenses (aka net profit)
profit before tax =
profit before interest and tax - interest
equity =
share capital + retained earnings
net assets =
total assets - total liabilities
total assets =
non-current assets + current assets
total liabilities =
current liabilities - long-term liabilities
net assets =
total assets - total liabilities
Note
Flashcard