IB Business and Management - Accounts and Finance

Sources of Finance

Sources of Finance

Various means by which a business obtains funds to finance its operations and growth, such as retained profits, bank loans, and issuing shares.

Investment Appraisal

Techniques used to evaluate the attractiveness and feasibility of an investment project, including methods like payback period, net present value (NPV), and internal rate of return (IRR).

Financial Statements

Reports that summarize the financial performance and position of a business, including the income statement, balance sheet, and cash flow statement.

Ratio Analysis

The use of financial ratios to evaluate a company’s performance and financial condition, such as profitability, liquidity, efficiency, and gearing ratios.

Budgeting

The process of creating a plan to spend an organization's resources, including setting financial targets and monitoring actual performance against these targets.

Depreciation

The allocation of the cost of a tangible fixed asset over its useful life.

Working Capital Management

Strategies for managing a company’s short-term assets and liabilities to ensure sufficient liquidity to meet its obligations.

Cash Flow Statement

A financial report that shows the inflows and outflows of cash within a company over a specific period.

Profitability Ratios

Ratios that measure a company’s ability to generate profit relative to its revenue, assets, or equity, such as gross profit margin and net profit margin.

Liquidity Ratios

Ratios that measure a company’s ability to meet its short-term obligations, such as the current ratio and quick ratio.

Gearing Ratios

Ratios that assess the level of a company’s debt compared to its equity, such as the debt-to-equity ratio.

Cost of Capital

The cost of funds used for financing a business, which includes the cost of debt and the cost of equity.

Break-even Analysis

A calculation to determine the sales volume at which total revenues equal total costs, resulting in no profit or loss.

Amortization

The process of spreading the cost of an intangible asset over its useful life.

Capital Budgeting

The process of planning and managing a company’s long-term investments in projects and assets.

Dividend Policy

A company’s approach to distributing profits back to its shareholders either in the form of cash dividends or stock dividends.

Cost-Volume-Profit (CVP) Analysis

A tool that helps managers understand the relationship between cost, volume, and profit in decision-making.

Retained Earnings

The portion of net income that is kept in the company rather than distributed to shareholders as dividends.

Financial Leverage

The use of borrowed funds to increase the potential return on investment.

Financial Planning

The process of creating a strategic plan to manage a company’s financial resources to achieve its goals.