Theme 2 Flashcards
Working capital
- businesses day to day finance (net current assets)
Key financial concerns for new business start ups
- start up costs
- running costs
- how much customers spend
Raising finance short term
- bank overdraft
- trade credit
Raising finance medium term
- bank loan
- leasing
Raising finance long term
- owners savings
- sales of shares
- reinvested profits
- venture capital loans
Financial management for an established business
- budgeting
- cash flow forecasting
Need for finance
- starting up
- growing
- cashflow problems
Internal finance
- retained profit
- sales of assets
- improved management of working capital
External sources of finance
- family and friends
- banks
- peer to peer funding
- business angels
- crowd funding
- other businesses
External methods of finance
- Loans
- share capital
- venture capital
- overdrafts
- leasing
- trade credit
- grants
Finance appropriate for unlimited liability businesses
- owners capital
- bank finance
- leasing
- trade credits
Finance appropriate for limited liability businesses
- share capital
- bank finance
- angel or venture capital
- peer-to-peer or crowdfunding
- leasing and trade credit
Relevance of business plan in obtaining finance
- executive summary
- product/service
- market
- marketing plan
- operational plan
- financial plan
- conclusion
Analysis of cash flow forecast
- difference between opening + closing balance
- monthly closing balance to assess trends
- analyse timings of inflows/outflows
Uses and limitations of cash flow forecast
- keep stock of raw materials to minimum
- helps budgeting
- uncertain (external factors)
- raw data inaccurate
Purpose of sales forecasts
- determines: Human resource plan (staff) Cash flow forecast Profit forecast Production scheduling
Factors affecting sales forecasts
- consumer trends
- economic variables (income elasticity, exchange rates, tax)
- competitors
Difficulties of sales forecasting
- changing economy
- dynamic market
2 ways to measure sales
- volume
- value
Ways to boost revenue
- higher price
- lower price higher volume
Why managers need to be aware of costs of production
- assess profitability
- compare with forecasted or budgeted figures
Fixed costs examples
- rent
- salaries
Variable costs examples
- raw materials
- commission
Break even calculation
FC/(sppu - vcpu)