PPQ - Finance Flashcards
Describe the following financial terms - Revenue (Sales) and Gross Profit. (2)
- Revenue (sales): The amount of money received for selling goods or services during the year
- GP is calculated by deducting cost of sales from sales revenue
Describe the reasons why a competitor may be interested in the financial information of an organisation. (2)
- To measure the organisation’s market share
- To compare costs eg expenses
Discuss the sources of long-term finance available to a plc (4)
- Share issue - Shareholders become owners of plc which may mean founders lose control
- Share issue - Large sums of money can be raised by this method
- Government grant - May take a long time to secure the grant
- Government grant - Must meet specific conditions to secure grant
Justify the use of spreadsheets within the finance department (4)
- Produces graphs and charts
- Formulae calculations are carried out instantly and accurately
- Easy to edit/amend
- Performs “What if” scenarios
Other than spreadsheets, describe how modern technology can be used by the finance department. (6)
- Database – can be used to sort large quantities of information on suppliers and customers
- Word Processor – can be used to send letters and invoices to customers or preparing financial reports
- PowerPoint – used to present information to staff
- Video-conferencing – finance manager can hold meetings with other managers without leaving their office
- E-mail – messages can be sent to more than one employee at a time
- Network (LAN) - can share files with all employees
Explain the benefits of preparing a cash budget. (5)
- It shows whether the business will have a surplus of cash which will allow them to plan future purchases
- It shows whether the business will have a deficit which will allow them to make adjustments to spending
- To make comparisons between predicted and actual figures this will help monitor the performance of the business
- It can be used to set targets for individual departments to achieve which will allow the business to stay within budget as predicted
- Highlighting periods where expenses may be high will allow action to be taken to control spending
Describe the impact on an organisation of having poor cash flow (5)
- Inability to pay suppliers
- Unable to pay expenses
- May need to find a cheaper supplier
- May have to offer discounts to encourage customers on credit to pay early
- Increased costs due to borrowing funds ie interest and bank charges
Describe appropriate long-term sources of finance for a large organisation. (4)
- Bank loan which is a sum of money borrowed from a bank and is paid back with interest.
- Government grant, money paid by government if certain requirements met
- Venture Capital is investment received in return for a share in the business
- Selling off assets which are no longer needed.
Describe the purpose of preparing a Statement of Financial Position. (4)
- To state the value/net assets of the organisation.
- It is a legal requirement
- Compare with previous years/competitors.
- Shows the working equity figure.
Justify the use of software such as spreadsheets to record financial information. (2)
- Formulae can be entered to carry out calculations
- Charts/graphs can be created.
Describe how the Statement of Financial Position may be used by the following NHS Health Scotland’s stakeholders - Scottish Government, Suppliers, Managers. (3)
- Scottish Government - to value the organisation
- Suppliers - will want to see if they can pay for goods and services
- Managers - to monitor and measure performance
Explain the purpose of preparing a cash budget. (3)
- it shows whether the business will have a surplus of cash - which will allow them to plan future purchases
- it shows whether the business will have a deficit - which will allow them to make adjustments to spending
- to make comparisons between predicted and actual figures - this will help monitor the performance of the business
