Management Of Finance Flashcards
The Role Of Finance
- record and maintain financial records
- pay bills
- pay wages and salaries
Sources Of Finance
Sole traders - are financed by owners savings
Partnerships - are financed by partners
Private Limited Companies - are financed by selling shares
Other Sources Of Finance
- Bank Loan
- Government Grants
- Bank Overdraft
- Hire Purchase
- Loan From Friends
- Mortgage
Fixed Costs
costs that always stay the same no matter how many units of a product is made e.g. rent, insurance, loan
Variable Costs
costs that change depending on how many units of a product is made e.g. raw materials, electricity total costs = variable + fixed
Revenue
this is the money that a business receives through selling a product. The more products sold, the higher the total revenue will be
Cash Flow
the amount of cash in a business
Poor Cash Flow Is Caused By
- spending too much money on unsold stock
- giving customers too long to pay debt
- not receiving enough money from sales
- owners taking too much money out a business
You Can Improve Cash Flow By
- cheaper suppliers
- selling equipment that’s not needed
- increasing marketing
- offering discounts to those who pay on time
- loans
What Is Cash Budgets?
a document that contains receipts and payments to help manage cash flow
Benefits Of A Cash Budget
- to show if the business will have a surplus or deficit
- if additional finance is required
- control expenses
- making decisions
What Is An Income Statement?
an income statement shows gross profit and profit for the year. It helps a business make decisions and calculate tax
Technology In Finance
A spreadsheet can be used for
- recording cost information and calculating break even
- preparing cash budgets
- preparing income statements
- create graphs showing income and expenditure
- prepare information that can be exported into other packages
