Business finance Flashcards
What are the different types of organisations types of organisations
Bank of England:
- This is the UK’s central bank with responsibility for maintaining a healthy level of financial stability for the UK as a whole
Banks:
- A bank is an organisation that handles financial transactions and stores money on behalf of its customers.
Building societies:
- These are organisations that handle financial transactions and store money on behalf of their members
- The members, or account holders, are part owners of the building society and have a right to vote and receive information on the running of the society.
Credit unions:
- These are not-for-profit organisation that handle financial transactions and store money on behalf of their members.
National Savings and Investments:
- This is a government - backed organisation that offers a service saving option
Insurance companies:
- These are businesses that sell policies to individuals, either privately or through employers, to allow them to save now to fund retirement in the future.
Pension companies:
- These are businesses that sell policies to individuals, either privately or though employers, to allow them to save now to fund retirement in the future.
Pawnbrokers:
- These are businesses or individuals who loan money against the security of a personal asset, for example an item of jewellery or piece of electronic equipment.
What are the different methods of interacting with customers?
Branch:
- Physical places where the customer will visit to carry out transactions which can be face to face, for example over the counter transactions or using computerised facilities such as automatic teller machines (ATM).
- Offer additional facilities and services such as advice
Online banking:
- The use of the internet to carry out banking transactions.
Telephone banking:
- When transactions are carried out over the telephone.
Mobile banking:
- The use of mobile devices such as mobile phones and tablets to conduct financial transactions
Postal banking:
- The use of the postal service to carry out paper-based financial transactions.
Consumer protection in relation to personal finance
Financial Conduct Authority (FCA):
- The FCA is an independent organisation with a remit to regulate the actions of providers of financial services.
What is depreciation?
Depreciation is a paper exercise to match the cost of an asset against the time it is used within a business. E.g. if a machine is purchased at a cost of £50,000 and is expected to last 5 years, this would not be shown as a one-off expense at the time of purchase but in the accounts shown as an expense of £10,000 per year.
What is depreciation?
Depreciation is a paper exercise to match the cost of an asset against the time it is used within a business. E.g. if a machine is purchased at a cost of £50,000 and is expected to last 5 years, this would not be shown as a one-off expense at the time of purchase but in the accounts shown as an expense of £10,000 per year.
What is straight line depreciation?
An asset is depreciated by a set amount each year / the simplest way to work out the loss of value of an asset over time
The value changes each year.
What is Retained profit
Profit (sales revenue minus total costs) kept in the business to fund future expenditure
What is net current assets?
Current assets minus current liabilities shows the money available in the business to fund day-to-day expenditure.
What is sale of assets?
Selling an item of worth owned by a business in order to achieve an immediate cash injections.
Liquidity
Exceeds overdraft - authorised unauthorised
Massive bank fees
Failed payments - suppliers may refuse your custom - bad suspects
- Liquidity worsened by the amount of sales - may reduce the credit period
- Purchase of assets and non current assets is going to affect your liquidity
- Loan - always affect liquidity and as business can be in problems if the interest rates go up - reduce its lending fees
- Consider leasing as an option
- Need to find alternative sources of finance
Margin of safety
Fixed costs / contributions per unit
- Why does a business need to know the margin of safety
- Advantages - know how much sales can fall before he starts making a loss
- Can make adjustments to his selling price
- Negotiate on purchase costs
- Disadvantages - all factors are predictions - does not consider external factors.
Gross profit formula
Sales revenue - cost of goods sold
Gross profit formula
Sales revenue - cost of goods sold
Net profit formula
Total revenue - total expenses
