Pages in this set

Page 1

Preview of page 1
Leah Powell 11R




Finance revision notes

Key words:
Cash ­All money in your business
Profit ­All money you have after you have paid your bills
Loss ­The difference between total revenue and total cost, where revenues are higher
than costs.
Insolvent ­When a business can no longer pay its debts…

Page 2

Preview of page 2
Leah Powell 11R




Long term liabilities Those liabilities which are borrowed for a longer time e.g. bank
loan
Working capital The term given to the money which is available for the daytoday
running of a business. It is used to pay bills such as creditors and wages and expenses
like…

Page 3

Preview of page 3
Leah Powell 11R




...Employees would not continue to work there if they were not getting paid their
wages.
...It saves the business from borrowing money all the time.

Purpose of cash flow
To enable the owner/manager to plan the firm's expenditure.
It shows when loans should be repaid.
It sets…

Page 4

Preview of page 4
Leah Powell 11R






4.3 Interpretation of accounts using ratios
Who would be interested in this information?
Owners and managers to study the accounts
The firm's bank
Tax authorities and employees of the business all have their own reasons for
watching its progress.

By reading the final accounts and balance sheet…

Page 5

Preview of page 5
Leah Powell 11R




On the other hand, if the business deals in goods which are low value e.g.
vegetables ­ it will make a large number of sales but each would be a small sum.
Stock of perishable goods would be replaced every working day.




Return on capital employed (ROCE)…

Page 6

Preview of page 6
Leah Powell 11R












Acid test ratio
This ratio measures if a business is able to pay its current debts without having to
sell some of its stock.







4.4 Breakeven
From a breakeven point you can tell whether a business is making a profit or a
loss.
If the business can…

Page 7

Preview of page 7
Leah Powell 11R




2. Fixed cost is assumed to never change. This is not always the case. Some
circumstances such as greatly increased production might mean taking on a new
premises which could increase the rates.
3. Sales are not always at a constant level. Businesses sometimes have to offer…

Comments

No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »