Sources of Finance, Profit and Loss, and Organisation of Businesses

This is a summary of notes on "Sources of Finance, Profit and Loss, and Organisation of Businesses" for Growing Businesses. I made this for my exam, hope it helps you with yours

HideShow resource information
Preview of Sources of Finance, Profit and Loss, and Organisation of Businesses

First 394 words of the document:

Sources of Finance
Retained profits- Profits that the business keep and use in the business
Re-invested savings- Banks savings from past retained profits
Fixed assets- Selling fixed assets such as machinery
Shares- Issueing more shares
Debentures- Long term loans from the public that the business pays with interest over a long
period of time
Loans/Mortgages- Banks are more likely to lend if the business is big and has a good track record
Factors when deciding which is more suitable:
Type of company
o Some may not have fixed assets to sell
o Only limited companies can issue shares
Amount of money needed
o A company needs to choose appropriate method for the correct amount of cash needed
Length of time
o Savings or overdraft would be better for short term finances but a loan would be better for
longer term
Cost of finance
o Bank loans are more expensive than savings as bank loans have interest to be paid upon
State of the economy
o If interest rates are high then loans will be more expensive
If interest rates are high then people will be less likely to invest as the risk is higher
Profit and Loss and Balance Sheets
Profit and loss accounts show revenue, costs, and profits of a business over a period of time
(usually a year)
Revenue- Money gained through sales
Costs of sales- the cost to make the product or service (raw materials and wages)
Gross profit = Revenue ­ Costs of sales ie. The money left over from sales after the costs to make
the product/service is taken away
Overheads- The costs that aren't directly associated with making the product (rent, advertising
and administration)
Net profit = gross profit ­ overheads } this is the final calculation in a profit/loss account and
shows whether the business is doing well or not.
Gross profit margin = Gross profit/Revenue x 100
o If the business has 25% gross profit margin, it means that they spend 75% of the revenue
from each product on the costs
o Can only judged relatively to the targets of the business
Net profit margin = Net profit/Revenue x 100

Other pages in this set

Page 2

Preview of page 2

Here's a taster:

Organisational Charts and Hierarchies
Organising businesses:
o Most limited companies use this style
o E.g. "Marketing director", "Production director" etc.
o Large manufacturers who make lots of different products
o E.g. "Toys", "Clothing", "Furniture"
o Multinational companies use this
o E.g.…read more


No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »See all resources »