Business Studies Finance

HideShow resource information
  • Created by: myer
  • Created on: 22-04-13 10:37
View mindmap
  • Business Studies Finance
    • Why do large businesses need finance?
      • new property.. e.g. offices, shops
      • machinery, equipment and vehicles
      • recruiting and training new employees
      • raw materials
      • deveploping new goods and services
      • introducing new methods of production
      • to pay for major marketing campains
    • sources of finance for large and growing businesses
      • selling unwanted assests
        • advantages
          • no intrest payments
          • may keep assests if leased back
        • disadvantages
          • many businesses do not have sustainable assets
          • leasing assets back means regular payments
      • a loan or mortage
        • adavantages
          • can be arranged quickly
          • allows repayment over a long period of time
        • disadvantages
          • intrest has to be paid
          • banks may require an asset as collateral
      • using retained profits
        • advantages
          • no intrest payments
          • can be arranged immediatly
        • disadvantages
          • only avaliable to profitable businesses
          • shareholders may oppose to the decision
      • selling more shares
        • advantages
          • no intrest payments
        • disadvantages
          • the owners may loose control of the company
          • only avaliable to companies
    • why do businesses prepare finacial statements?
      • the law
      • to help the business managers
      • to guide investors
    • profit and loss key terms
      • revenue
        • income recieved by a business from selling its goods and services
      • cost of sales
        • these are the cost involved in directly supplying the good or service, this includes: wages, raw materials and energy costs
      • gross profit
        • this is the revenue minus the cost of sales
      • over heads
        • these are the costs that do not alter when the level of production changes. this includes: saleries of managers, insurance costs, intrest on loans
      • net profit
        • this is calculated by taking overheads away from the gross profit
    • balance sheet
      • this sets out the assets and liabilities that a business has on a particular day. it shows where the business's money is coming from and how the business has spent the money that it has raised.
        • assets- an asset is anything that is owned by a business.
          • fixed assets- a business will normally keep this type of asset for many years.
            • E.g. shops and vehicles
          • current assets- these are assets that the business only expects to have for a short time usually less than a year
            • E.g. cash, stocks of raw materials
            • current assets are used by the business to settle debts such as paying for raw materials
      • liabilities- liabilities are the amounts owed by a business to other businesses and inderviduals.
        • current liabilities- debts that a business will pay within a year.
          • E.g. money owed to suppliers and that the business has to pay
        • long- term liabilities- debts that will be paid back over many years.
          • E.g. bank loans
      • total equity
        • total equity is part of a companys money that belongs to sheholders.
    • ratios- ways to judge whether the business is sucsseful
      • Gross profit margin- this compares the business's gross profit for a trading period with the revenue figure for the same period
        • net profit margin(%)= gross profit / revenue x100
      • net profit margin- this compares a business's net profit for a trading period with the revenue figure for the same period
        • net profit margin(%)= net profit / revenue x100
      • current ratio- this ratio compares the value of the current assets that a business has with the figure for its current liabilities. this will help you to see whether a business has enough assets that it may sell for cash to enable it to pay its short-term debts.
        • current ratio= current assets / current liabilities
      • acid test ratio- the current ratio is not always a good guide to whether a business can pay its short term debts as it includes a figure for stock. stock is not always easy to sell quickly
        • acid test ratio= current assets-stock / current liabilities

Comments

EJAM

far too cramped, very poor!

CreditUnions

Somewhat hard to read. Might consider learning how to save money alternative. 

Cameron McKenna

IGNORE THEM!! PRINT IT OFF ITS MUCH CLEARER AND AMAZING!!!!

Similar Business Studies resources:

See all Business Studies resources »See all Finance resources »