finance Flashcards
what is an expenditure
a cost
what is a budget
a forward financial plan concerning the revenue and costs of a business
3 types of budgets
-sales revenue or earning budget
-expenditure budget
-profit budget
variance analysis what is favourable
means it’s better than expected
variance analysis what is adverse
worse than expected
what is variance analysis
calculating and investigating the difference between actual results and the budget
return on capital employed calc
operating profit/ capital employed X100
how to work out capital employed calc
total equity + non current liabilities
cash flow objectives
3
-extending cash outflows to suppliers
-shortening payment period for customers
-maintaining a specific amount of cash in reserve
importance of a financial objective
2
-helps plan for future
-increase chance of survival as of good management
what is a financial objective
an objective/target set by finance departments
what are receivables
(debtors) time takes for customers to pay back
what are payables
time taken to pay back suppliers
what are overhead/expenses
FC/ indirect cost
what is a cost of sale
a direct cost which relates to production cost of specific goods
why is a cash flow forecast important
3
-anticipates times and amounts of any cash shortages
-understand where cash has been spent
-arrange financial cover for any shortages
what is liquidity
money that can be reinvested and that is accessible
why are cash flows forecasts unreliable
2
it’s only a predication and demand could change
what is the gross profit calc
gross profit/ sales revenue X100
what is opening balance
money already in your account at the start of the month
what is closing balance
the net cash flow so than that will be the next opening balance
what is the calc for net cash flow
total cash inflow- total cash outflow
limitations of budgeting
3
-no history to base data on
-change in tastes or advance in tech
-market research needs to be accurate
uses of budgeting
2
-helps a business control its finance by planning expenditure
-targets to motivate workforce
