Business Studies Unit 2 -Finance 4.0 / 5 based on 1 rating ? Business StudiesFinanceGCSEAQA Created by: GraceRobinsonCreated on: 16-02-16 10:28 Define retained profit profit kept in the business after tax and dividends have been paid 1 of 35 Define selling unwanted assets to pay for expansion or pay of debts 2 of 35 Define share issue selling shares of a company to pay for LT expansion 3 of 35 define loan money from banks for ST or LT purposes 4 of 35 4 finance strategies for large businesses share issue, retained profit, loan and selling unwanted assets 5 of 35 advantages and disadvantages of retained profit no interest+no loss of control however business may expand and still not be profitable or when profit is low the growth is slow 6 of 35 advantages and disadvantages of selling unwanted assets no interest+no loss of control however assets are no longer owned and could have tax 7 of 35 Advantages and disadvantages of share issue share capital doesn't have to be paid+no interest however dividends are expected by shareholders+may be loss of control 8 of 35 advantages and disadvantages of loans no loss of control+lower interest rate than overdraft however interest could be high and must be repaid 9 of 35 define profit and loss accounts shows how much a firm earned from selling goods or services and how much its paid out in costs 10 of 35 the purpose of a profit and loss account see if a profit or loss was made, how much cash is flowing in and out and when suppliers+taxes need to be paid 11 of 35 What the profit and loss account shows product sold and value of item, equipment+assets purchased and wage+other labour costs 12 of 35 Define sales revenue value of sales revenue increases when number of units sold increases 13 of 35 sales revenue equation no of goods sold x price of product 14 of 35 define cost of sales cost of the business of the goods sold 15 of 35 equation for cost of sales opening stock + purchases - closing stock 16 of 35 equation for gross profit sales revenue - cost of sales 17 of 35 equation for new profit gross profit - overheads (expenses) 18 of 35 define overheads expenses of the business that aren't part of production e.g.- rent or salaries 19 of 35 equation for gross profit margin gross profit divided by revenue x 100 20 of 35 equation for new profit margin net profit divided by revenue x 100 21 of 35 how to increase gross profit margin business can increase margin by increasing price or reducing cost of sales making higher profit on each pound of sales 22 of 35 how to increase new profit margin increase price of goods, cost of sales decrease or reduction in overheads 23 of 35 define balance sheet financial statement showing businesses assets, liabilities and capital on a particular date 24 of 35 define fixed and current assets fixed- last long time+expensive (e.g. buildings) current- used and replaced regularly (e.g. stocks or raw materials) 25 of 35 define current liabilities and debentures current- short term payment to debtor debenture- long term loan 26 of 35 define capital amount invested in the business by the owner 27 of 35 Define share price price of shares 28 of 35 how to interpret a balance sheet analyse using current ratio+acid test ratio to show liquidity 29 of 35 define liquidity refers to businesses ability to pay of ST debts 30 of 35 Define liquidity assets assets held on cash form 31 of 35 Define working capital money used for day to day running of the business 32 of 35 current ratio equation current assets divided by current liabilities 33 of 35 how to improve current ratio increase value of profitable sales and turn overdraft into LT loans (reducing ST liabilities and increasing capital) 34 of 35 acid test ratio equation current assets - stock divided by current liabilities 35 of 35
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