Higher business finance everything

Finance source

Owners personal finance, retained profits, sale of assets, sell and lease back, share issue, debentures, bank overdraft, trade credit, debt factoring, grants, bank loan, hire purchase, mortgage, venture capitalists, crowd funding

Owners personal finance

Keep control, reduced borrowing, difficult to withdraw, risk of losing savings

Retained profits

Profits that were previously held back, used for larger purchases, no debt, difficult to grow if regular used

Sale of assets

Selling part org no longer needs, boosts cash flow, no repay, if urgent then sold for less than its worth

purcpose of budgeting

predict cash flow problems alike surplus or deficit, investement to be planned, when to take action, compare figures

solutions to cash flow problems

too much money in inventory- sell excess,jit. credit sales-offer cash discounts.switch suppliers with interest free, sell online, adapt marketing mix, sell debt to debt factories

opening balance definition

Cash available at the start.

closing balance

Cash available less total payments. cash available at end of month

reciepts

all the money coming into the business such as sales or rent received

cash available

available to spend- opening balance + total receipts

non current assests

items of value kept for more than one year0 show current value of major purchases that help run org

difference between less and non current liabilities

less short term, less long

net assessts

value of org when liabilities taken from assets

equity and reserve

how much investment and any profit kept

liquidity

Refers to the cash-flow situation in an organisation

income statement

A financial statement which shows the Gross Profit and Profit for the Year.

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Income Statement

A financial statement which shows the Gross Profit and Profit for the Year.

Sales revenue

The amount of money made from selling goods/services

Cost of Sales

The amount of money spent on selling goods

Gross profit

The profit made from buying and selling- improved by increase revenue and decrease costs

Expenses

The running costs incurred throughout the year

Profit for the year

The profit made after expenses are deducted- increased by reducing payments

Cash budget

Helps organisations remain liquid

Opening balance

amount of cash at the beginning of the month

Total receipts

The total cash received during the month

Cash available

The amount of cash available to spend - calculated by opening balance + total receipts

Total payments

the total amount of cash spend during the month

Closing balance

the amount of cash available at the end of the month, calculated by cash available - total payments

Problem: Cash sales are falling

Solution: the business should engage in marketing to boost sales

Problem: Purchases are increasing

Solution: Use JIT to avoid tying too much money up in stock

Problem: expenses are increasing

Solution: Negotiate a better deal with your suppliers

Problem: Negative closing balance

Solution: arrange short term sources of finance such as an overdraft

Statement of Financial Position

A financial statement that shows the items a business owns (assets) and items they owe (liabilities) and the overall value of the business.

Assets

Items owned by a business

Liabilities

Items owed by a business

Current Liabilities

Items owed for a period of less than one year

Non-current assets

Items owned for a period of more than one year

Current assets

items owned for a period of less than one year

Working equity

the ability to pay short term debts, calculated by current assets - current liabilities

Net assets employed

The value of non-current assets added to the working equity

Non-current labilities

items owed by the business for a period of more than 1 year

Net assets

The overall worth of the business, calculated by net assets employed - non-current liabilities

Equity

This shows how the business has been financed

users and purposes of finalcial statements

owners-asses profits to make decisions, employees- job secure check, hmrc-ensure correct tax, trade unions-if due oay rise, competitors-measure success, investors-potential, lenders-to give or not give loa

purcpose of budgeting

predict cash flow problems alike surplus or deficit, investement to be planned, when to take action, compare figures

solutions to cash flow problems

too much money in inventory- sell excess,jit. credit sales-offer cash discounts.switch suppliers with interest free, sell online, adapt marketing mix, sell debt to debt factories

opening balance definition

Cash available at the start.

closing balance

Cash available less total payments. cash available at end of month

reciepts

all the money coming into the business such as sales or rent received

cash available

available to spend- opening balance + total receipts

non current assests

items of value kept for more than one year0 show current value of major purchases that help run org

difference between less and non current liabilities

less short term, less long

net assessts

value of org when liabilities taken from assets

equity and reserve

how much investment and any profit kept

liquidity

Refers to the cash-flow situation in an organisation

income statement

A financial statement which shows the Gross Profit and Profit for the Year.

sa

Income Statement

A financial statement which shows the Gross Profit and Profit for the Year.

Sales revenue

The amount of money made from selling goods/services

Cost of Sales

The amount of money spent on selling goods

Gross profit

The profit made from buying and selling- improved by increase revenue and decrease costs

Expenses

The running costs incurred throughout the year

Profit for the year

The profit made after expenses are deducted- increased by reducing payments

Cash budget

Helps organisations remain liquid

Opening balance

amount of cash at the beginning of the month

Total receipts

The total cash received during the month

Cash available

The amount of cash available to spend - calculated by opening balance + total receipts

Total payments

the total amount of cash spend during the month

Closing balance

the amount of cash available at the end of the month, calculated by cash available - total payments

Problem: Cash sales are falling

Solution: the business should engage in marketing to boost sales

Problem: Purchases are increasing

Solution: Use JIT to avoid tying too much money up in stock

Problem: expenses are increasing

Solution: Negotiate a better deal with your suppliers

Problem: Negative closing balance

Solution: arrange short term sources of finance such as an overdraft

Statement of Financial Position

A financial statement that shows the items a business owns (assets) and items they owe (liabilities) and the overall value of the business.

Assets

Items owned by a business

Liabilities

Items owed by a business

Current Liabilities

Items owed for a period of less than one year

Non-current assets

Items owned for a period of more than one year

Current assets

items owned for a period of less than one year

Working equity

the ability to pay short term debts, calculated by current assets - current liabilities

Net assets employed

The value of non-current assets added to the working equity

Non-current labilities

items owed by the business for a period of more than 1 year

Net assets

The overall worth of the business, calculated by net assets employed - non-current liabilities

Equity

This shows how the business has been financed

users and purposes of finalcial statements

owners-asses profits to make decisions, employees- job secure check, hmrc-ensure correct tax, trade unions-if due oay rise, competitors-measure success, investors-potential, lenders-to give or not give loa

Owners personal finance

Personal savings and money from fam and friends

Owners individual finance adv

Allows owner to keep control and reduce amount borrowed

Owners individual finance dis

Risk losing savings and difficult to withdraw

Retained profits

Org holding back profits from past years

Adv for retained profits

Used to make larger purchases and won't go into debt

Retained orfots dis

Difficult to grow if regularly uses retained profits

Sales of assests

Selling something org no longer needs

Sale of assets adv

Money raised from sale used to boost cash flow and money doesn't need to be repaid

Sale of assets dis

If finance needed urgently then org have to sell asset for less than worth

Sell and lease back

Selling an asset and leasing aka renting it back

Sell and lease back Adv

Use of asset retained and no more responsiblity

Sell and lease back Dis

Expensive in long run

Share issue

Selling shares

Share issue Adv

Large sums raised and money doesn't need to be repaid