paper 2 finance function Flashcards
what is the role of finance function
manage the money a business needs to operate
what does finance function do
keeps an eye on finances to cope with problems it may face
which type of companies have their own finance function
larger businesses
what do sole traders and partners have instead
accountants
what forms does finance information take (3)
cost of revenue of business
information on profit and loss
data on average rate of return
who supplies the finance information
finance department
what business activity does finance influence (3)
expansion
replace equipment
paying expenses
if a business can not gain finance what will it result in
business activity is restricted and the business can not grow
how can need for finance effect legal form of business (3)
sole trader wanting to expand may ask someone who can provide finance to become a partner - changing the business into a partnership
partnership changes into private ltd
private ltd will become public ltd
how does finance function influence business activity
it provides information to departments to make decisions
what is sources of finance
where a business gets its money from
what is revenue
money business receives from selling goods
how is profit or loss calculated
total revenue-total cost of production
what is break even analysis
number of products a business needs to sell to cover all of it’s costs
what is cash flow record
record of inflow and outflow of money from the business- use to see if they can pay the bills or is finance needed
give examples of where business information is useful for decisions (4)
if a business wants to be more environmentally friendly it may need to increase costs - may need additional funds for marketing or to change production
a business maybe effected by recession when sales are reduced the finance department needs to give information on revenue and costs to help know how to respond
a business considering change from job to batch needs information predicting change to revenue costs - how these changes will effect cash flow
business wants to change how it markets products by advertising on tv. Finance department needs to give information about costs and how to raise the finance
what jobs are done by finance function (7)
calculate sales revenue
production costs
calculate profit and loss
manage payments
arrange finance
calculate break even
calculate average rate of return
