management of finance Flashcards
what are the sources of finance?
owner's funds retained profits bank overdraft loans government grants hiring and leasing share issue selling assets venture capital factoring trade credit
what are fixed costs?
fixed costs are costs which stay the same regardless of units produced or sold eg rent and rates
what are variable costs?
variable costs are costs which change directly with production eg materials and labour
what are advantages of break even analysis?
you can see at a glance how many units need to be sold before a profit starts to be made
can see how much profit or loss is being made at different levels of output
it can aid decision making
what are the limitations of break even analysis?
difficult to use if the business makes more than one product
it assumes that all units produced are sold
doesn’t take sudden increases in wages or prices into consideration
what is a cash budget?
a cash budget is a plan that a business prepares for internal use
what is poor cash flow caused by?
spending too much money on stock that has not sold
giving customers too long to pay their debts
not receiving enough money from sales
not receiving enough time to pay bills from suppliers
owners taking to much money out of the business
how can you improve cash flow?
reduce costs - spend less on advertising increase selling price increase sales units (quantity sold) find a cheaper supplier raise extra capital take out a loan arrange an overdraft in advance tight credit control spread purchase costs
how is technology used in finance?
spreadsheet:
record cost information and calculate break even
prepare cash budgets
calculate profit
create graphs showing income and expenditure
prepare information that can be exported into other packages
