Monitoring Operations Flashcards
What are financial reports?
The objective of financial reporting is to track, analyse and report your business income.
What does financial position equal to?
Stability
What does financial performance equal?
Profitability
What does cash flow equal?
Liquidity
Explain financial position of the business?
- A business organisation will show its total assets and equities in the form of a balance sheet or statement of financial position.
- This report gives essential information about the organisation’s financial stability and shows the financial position at a point in time.
What is a balance sheet comprised of:
- Assets
- Liabilities
- Equity
Explain assets
- Assets are the items your company owns that can provide future economic benefits.
- They are of value
Give examples of assets
- inventory
- furniture
- machinery
- buildings
Explain liabilities
- Debts owed by the business to other entities.
- And other financial obligations.
Give example of liabilities
- overdraft
- loan
- mortgage
- wages.
Explain equity
- The owners share of the business.
- It is calculated by subtracting liabilities from assets.
Give example of equity
- capital
- drawings
- profit/loss
What is capital?
the owner’s investment of funds and other assets
What is drawings?
The amount remaining when all the expenses have been subtracted from income for the accounting period.
What is the profit?
The amount remaining when all the expenses have been subtracted from income for the accounting period.
Explain the financial performance of the business
• A business will show income and expenses in the form of an income statement, also called a Profit and Loss Statement or a Statement of Financial Performance.
What is business’ profitability?
This gives important information about the profit or loss that the business has earned
What is the Profit and Loss statement composed of?
- Income
- Expenses
What is income?
The money received by the business
Give examples of income
- sales
- fees
- interest.
What is expenses?
Are payments or costs incurred by the business
What are examples of expenses
- the cost of sales
- rent, wages
- internet
- water.
What expenses have Income Statement/Profit and Loss statement classified?
- Selling
- Administrative
- Fiancial
What is an example of selling?
- Petrol
- Vehicle repairs
- Advertising
- Maintenance
What is an example of administrative?
- Office
- Rates
- Power
- Phone
- Internet
- Rent.
What is an example of financial?
- Intrest
- Bad debts
What information do the balance sheet and income statement provide?
Important information about the financial position and performance of the organisation.
What is calculated in the income statement?
The excess of income over expenditure for a business being profit
What is cash flow?
the amount of cash entering and leaving the business
What are the five elements of financial statements?
- Assets
- Liabilities
- Equity
- Income
- Expense.
What does the fiances of the business revolve around?
Revolve around either profitability or liquidity
How does a business show cash flow?
A business organisation will show cash inflows and outflows in the form of a Statement of Cash Flows.
Explain the Statement of Cash Flows
A financial report that gives important information about the liquidity of the organisation and shows the cash coming in and going out of the business over a period of time.
What is monitoring success?
Monitoring or control is one of the most important elements of a manager’s role in a business.
The business will monitor the structures that it has set up to determine how the mission statement and goals are being achieved.
What are the additional subsidiary considerations in monitoring of success?
- Human resources
- Finances
- Marketing
What is control mechanisms?
Control mechanisms are the policies and procedures in the business that are used to regulate activities.
Why are control mechanisms important?
- They are important in a business because they allow the business and its managers to check, regulate and record how the business is performing against required standards.
- The business needs to undergo regular review, to ensure that it is meeting business objectives
What are the important areas of business control?
- Product
- Processes
- Physical locations
- Physical resources
- Human resources
- Finances.
What is an example of control mechanisms?
A firm may require two signatures on checks more than $10, 000 or have one person log journal entries and another person review the entries.
- These policies help prevent fraud and errors.
What is used to measure and monitor performance
Control mechanisms such as ratio analysis, budgets, financial statements, and key performance indicators
What is a budget?
A budget is a forecast of the financial position and performance of the business.
What can budgets project?
Project the capital needs, income, expenses, or cash flows for a period of time into the future.
What are budgets used for?
Planning
Monitoring
Controlling.
What does a budget variance report do?
Compares budget estimates with the actual results, for a particular financial report.
What are favourable variances?
Occur when the actual result is better than the estimated amount, for example, if sales are higher than expected or if expenses are lower than expected.
What are unfavourable variances?
Occur when the actual result is worse than the estimated amount for example if cash inflows are lower than predicted or cash outflows are higher than predicted.
What is a budget prepared on?
A budget is prepared based on current expectations of markets and sales, a review of past results and trends, and new trends and potential markets.
What is the purpose of a Budgeted Balance Sheet?
If the business needs to plan for future income and expenses, it will complete a Budgeted Balance Sheet.
If the business needs to plan for future income and expenses, it prepares what?
Budgeted Income Statement.
