3.5 decision making to improve financial performance. Flashcards
5 financial objectives
revenue, cost, profit, cash flow, investment.
2 internal influences on financial objectives
performance, mission
2 external influences on financial objectives
economy. market.
define budget
is the businesses spending plan
favourable variance
actual income more than the budget
adverse variance
actual income less than budget
define a payable
money required to be paid
define receivable
money owed to a business
benefit of breakeven analysis
determining when your business is going to make a profit
drawback of breakeven analysis
assumes all stock is sold
what is debt factoring
debt company buys your invoices your owed and they take 5-10% for example
+ and - of debt factoring
instantly receive what you are owed, don’t receive all of it.
what is overdraft
lets you use more money than you have in your bank
+ and - of overdraft
gives instant access to more funds. have to pay interest on money
what is retained profits
reinvesting profits made into the business
+ and - of retained profits
+ = don’t have to pay interest on
- = shareholders may ask for more in dividends
what is share profit
money used from selling shares
+ and - of share profit
+ = no repayment requirement
- = ownership dilution
loans
borrowing money from banks
+ and - of loans
+ = can get instant access
- = have to pay interest
venture capital
private equity funding from venture capital firms
+ and - of venture capital
+ = no repayment
- = gives away shares
ways a business can improve cash flow
offer discount for early repayment. Increase pricing. send invoices out immediately. customer credit checks.
ways a business can increase profit
budget. reduce costs. reduce waste. cost management.
