AQA A Level Business Studies - Unit 5 - Key Terms

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  • Created on: 22-06-18 17:46

AQA A Level Business Studies - Unit 5

Key Terms

Financial objectives - Are the specific, focused aims or goals of the financial and accounting function or department within an organisation.

Financial accounting - Keeping records of previous financial performance for the purposes of reviews and adherence to legal regulations.

Management accounting - The use of financial tools to enable better decision-making: budgeting, break-even costs, returns on investment calc, cash flowing forecasting, ratio analysis.

Revenue objectives - Businesses commonly set themselves objectives of earning a certain amount of revenue over a period of time. Relating to the level of income from sales.

Cost objectives - Business objectives in order to maximize profit, by reducing costs. Business should be mindful that cost saving should not effect the customer opinion of their product or service. Relating to expenditure for production.

Cash-flow objectives - Cash flow is crucial to the survival of a business. Some firms might have more focusing on managing a healthy cash flow. Relating to the ability of a organisation to find its day to day operation.

Profit objectives - It is very common for a business to have a PO. As with cost minimisation, this is frequently an objective for the entire business and not just its finance function or department. Relating to the amount of profit to be achieved.

Return on investment objectives - Relating to the levels of profit to be achieved by each investment.

Capital structure objectives - Relating to the extent the Business if financial internally, or by debt.

Gross profit - The difference between revenue and the cost of producing goods or services sold. Revenue - the costs of sales.

Operating profit - Operating profit is an accounting figure that measures the profit earned from a firm's normal core business operations, thus excluding deductions of interest and taxes. Profit made from trading (gross profit - administration/operating expenses). This value also does not include any profit earned from the firm's investments, such as earnings from firms in which the company has partial interest. The profit earned by a business from its entire trading operations - stated before financing (e.g: interest) and tax.

Investment - describes items that are purchased by firms because they help them to produce goods or services.

Return on investment - A measure of the efficiency of an investment in financial terms, used to compare the financial returns of alternative investment.

Investment appraisals - Process that managers use to compare the costs of an investment to the expected revenues it will incur.

Debt as a proportion of long term funding - Debts, such as bank loans, mean that businesses must pay back interest payments and the full amount must be paid back by an agreed cost. Shareholder funding (or share capital) requires no repayment, but shareholders will expect a dividend (% of the profit).

Income statement - An income statement is a financial statement that reports a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities.

Assets - Is amounts owned by, or owed to a business. Something valuable that an…

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