BUSS2 bible PDF

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  • Created on: 03-06-13 21:02
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BUSS2 Credit sales are just revenue because they have made
the money but it has not yet been paid.
There are many sources of cash inflows but only 1
A good budget must be:
source of revenue, customers.
Be consistent with the aims of the business.
Be based on the opinions of as many people as
Costs and Cash Outflows:
possible.
Cash outflow is all money that leaves the business.
Not decided by someone who has done little
Costs are the outgoings that are directly involved
research.
with the running of the business.
Set challenging but realistic targets.
Credit purchases are costs but not outflows as the
Specific, manageable, achievable, realistic and time-
money has not yet left the business.
based.
There are many reasons for cash outflows but only
Be monitored at regular intervals.
one reason for costs, and these relate to the business
Be flexible
costs.
Variance is the difference between the budgeted figure and
Cash Flow:
the actual outcome. This can be adverse of favourable. It is the
Cash flow is the short term impact of financial
process by which budgeted figures are examined and then
decisions as it displays a monthly figure.
compared to actual outcomes.
Profit is the long term value of financial decisions.
Cash flow problems:
Profit or loss is the difference between the revenue and the
To much outflow
costs incurred within a business.
To little inflow
Inflows come after outflows
Profitability is the ability of a business to generate profit or the
efficiency in which they do so.
Reasons for shortage of cash:
Seasonal demand
Net profit margin:
Over trading from over expanding
Compares the profit made with the total income.
Over investment in fixed assets
NPM(%)=net profit before tax/income x 100%
Credit sales
This tells you the % of the income that is profit.
Poor stock management
For this to have meaning, it must be compared to
Unforeseen changes e.g. strikes, economic downturn previous figures and competitors.
Low profits
Return on capital employed (ROCE):
Benefits of budgets: Compares the profit made with the amount of capital
Set targets invested.
Measure of success ROCE(%)=net profit/capital invested x 100%
Avoid over spending This tells you the % of the total investment that is
Forecast future profit.
Portion spending This should be compared to competitors, previous
Motivate staff figures and with bank interest rates as this is a more
Improve efficiency secure form of investment.
Encourage planning
A business could increase their profitability by:
Drawbacks of budgets Increasing the price of the profit:
Do not count for changes in the economy o Could cause customers to cancel contracts.
Unpredicted variables o Cancel self out of the market.
Needs skill and large amount of research. o But would make more profit on each sale.
Could be incorrect or unfair Cut Costs:
People could make cuts and damage the business. o Higher profit.
Difficult to monitor o Loss in quality of the product.
Increase the sales volume:
Revenue and Cash Inflow: o Marketing
Cash inflow is all money that comes into the business. o Improve promotional campaign
Revenue is all money made from the sale of their o Change the product (new design)
service or product. o Improve the quality.

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Labour turnover is the proportion of employees leaving a
business over a given period of time. They can have a narrow or wide span of control and this
= number of leaving staff/average number of staff x describes the number of people under the supervision of any
100 one manager. Advantages and disadvantages of narrow:
This must be compared to other businesses for it to Allow close management supervision (vital for
be useful.…read more

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Managers must relinquish control in order to make Operations management is about producing the right amount
the sub ordinates feel trusted. of a good or service, at the right time, of the right quantity, at
Advantages the lowest costs in order to meet customer expectations.
Inexperienced employees are not required to make
decisions. Maximum capacity is the maximum number of units of output,
It frees up time for managers to concentrate on or customers they can serve, in a given period of time.
strategic tasks.…read more

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Continuous improvement: this is small and regular Storage space is much less.
improvements in quality by each member of staff.
Leads to big changed are a business's ethos. Computer Aided Manufacture
Benchmarking: is where employees aim to meet the Robotics and machinery can 24/7 without breaks.
same standards as the market leader. Need no motivation to work or salary. There is no risk
of strike or down time as a result of employee
Good customer service is where the business identifies and absence.…read more

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Specific skills needed o They have been developed to combat
o Personality unemployment in developed countries.
Job evaluation is where the job is assessed compared Job centres
to other jobs and is the salary is designated o Advertises job vacancies that employers
accordingly. This encourages equal pay. It is subject send to them. This is accessible via their
to opinion and thus people are often over and website or phone.
underpaid.…read more

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It provides better means of communication with the
employee and the employer. Non-financial incentives:
The employee understands how they could improve.
Able to set new targets to motivate staff. Job enrichment is increasing the depth of the job by increasing
the amount of authority to the employee.
Financial incentives for motivation:
Job enlargement is giving the employee a wider variety of
Wages require workers to be at work for a number of specific tasks within a job description.
hours. Usually paid weekly.…read more

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Below -1, the product is elastic. This means that the change in The behaviour of a product is standard. It goes:
demand is greater than the change in price so they should Research and development
lower their prices. However, demand will be costly as higher Growth
production needed and more profit may not be made. Maturity
Saturation
The 4 Ps! Decline/extension strategy
PRICE Development:
High cost per unit.…read more

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This is where a business will try to create a
good public image and reputation.
Merchandising
o Where a brand will use their logo or name
in order to promote another product e.g.
football club merchandise.
Branding
o Merchandise is given a brand name. The
business can market the brand and not
necessarily each individual product.
Direct Marketing
o This is where a firm will send a sales person
to the customer in order to persuade them
to purchase a product.…read more

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