Finance Flashcards
Describe an income statement
shows how much profit the business made from trading last year
shows the sales and expenses of the business
Describe a statement of financial position
shows how much a business is worth at a particular time
to show the assets and liabilities of a business
How can a business reduce their cost of sales
find a cheaper supplier
buy raw materials from countries where labour is less expensive
buy from local suppliers to reduce delivery costs
use just in time stock control to reduce stock wastage/storage
buy in bulk to receive bulk buying discounts
Describe a journalists interest in a businesses finance
they would use them to prepare an article for their newspaper
Describe a inland revenue interest in a businesses finance
to determine whether or not the company sispaying the appropriate level of taxation of their profits
Describe the local communities interest in a businesses finance
to assess the stability of employment in their local area
closure or success of a company may affect the value of property in the area
Describe the banks interest in a businesses finance
to determine whether or not they should provide the company with additional finance
to assess the liquidity of a company
Describe the interest of suppliers in a businesses finance
used to assess the likelihood of repayment of money due
used to assess the credit terms given to a company
used to assess the security ot receiving future orders
Describe a managers interest in a businesses finances
check company’s performance in comparison to previous years
to identify areas of improvements for next year
Describe the shareholders interest in a businesses finance
look at profit figures to decide whether they should sell existing shares
potential shareholders would be looking at profit figures to decide whether they should invest at all
Describe a cash budget
to estimate the movement of cash in and out of a business on a monthly basis
- you end with either a deficit or a surplus
- it is a prediction and used internally
- a cash budget can be produced quarterly, 6 months or yearly
Describe the purpose of a cash budget
highlight a shortfall or deficit to give you time to arrange finance
to avoid cash flow problems
used to monitor spending throughout the organisation
to highlight a surplus to give you time to arrange investments
is used to give departments a budget to focus on
can make comparisons between projected and actual performance
Describe the causes of cash flow problems
poor sales
too much money tied up in inventory
buying large pieces of equipment at the wrong time
allowing too much credit
customer
customers not paying within agreed credit period
borrowing too much at high interest rates
owners withdrawing too much drawings
Describe ways of resolving cash flow problems
offer discounts and promotions to increase sales
lower the credit you allow your customers
give customers discounts for prompt payment
arrange credit from your suppliers
obtain a bank loan
identify new sources of finance
buy new equipment on credit
withdraw less money from the business
Describe the trade union/ employees interest
if profits have increased then employees would be expecting a pay rise in line with the raise
look at the profits/ success of the company to assess their job security
to determine talks with employers with regard to level of pay employees receive
Describe the role of finance
payment of wages/ salaries
to control costs and expenses
monitor cash flow
produce final statements
analysis of accounting information
forecast future finances
provide information to decision makers
obtain/ arrange sources of finance
