2.3 Managing Finance

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Fixed Asset (Non-Current Asset)
Resources that can be used repeatedly (for more than 1 year).
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Current Asset
Short-term items that will be turned into cash within a year.
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Tangible
Things you can see, e.g. stock.
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Intangible
Things you can't see, e.g. brand name.
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Recievables
These are debts owed to the business.
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Long term (not current) Liabilities
Debts due for repayment after a year.
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Operating Profit
Gross Profit- Operating expenses (the costs associated with producing, marketing and selling the goods).
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Current Ratio Formula
Current Assets/ Current Liabilities. (1.8-2.2 is ideal)
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Acid Test
Current Assets- Stock/ Current Liabilities. (0.8-1.2 is ideal)
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Budget
This is a plan of expenditure or action, which is agreed in advance and linked to the company's objective.
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Variance Analysis
Refers to the difference between the actual figures and budgeted figures. Adverse (A) and Favourable (F).
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Internal causes of business failure
Lack of planning; cash-flow problems; lack of funds; narrow customer base; marketing problems; poor leadership.
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External causes of business failure
Competition, changes in consumer tastes, economic conditions, market price changes.
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Reasons why companies set budgets
Control and Monitoring; Planning; Co-ordination; Communication; Effieciency; Motivation
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Two types of budgeting
Historic Budgets; Zero-Base Budgeting
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Skimming Pricing
Setting prices very high when a product is introduced to take advantage of people's desire for a new product.
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Pyscological Pricing
E.g. £99.99, to make a product look cheaper.
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Premium Pricing
Can charge higher rates due to brand loyalty.
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Other cards in this set

Card 2

Front

Short-term items that will be turned into cash within a year.

Back

Current Asset

Card 3

Front

Things you can see, e.g. stock.

Back

Preview of the back of card 3

Card 4

Front

Things you can't see, e.g. brand name.

Back

Preview of the back of card 4

Card 5

Front

These are debts owed to the business.

Back

Preview of the back of card 5
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