Business - finance

5.1 - role of finance

5.2 - sources of finance

5.3 - revenue, cost

owners capital

revenue = quantity sold x price

role of finance department

calculating sales revenues and production costs

calculating profit and loss using sales and production costs

forecasting cash flow - expected revenues and expenditures to decide if finance is needed

managing payments eg wages

arranging fiance eg loans/shares

calculating break even output

retained profit

sale of assets

overdraft

trade credit

taking on a new partner

loan

fixed costs - costs that don't change depending on the output.

variable costs - costs that change depending on the output.

5.4 - breakeven

the amount a business must sell o cover its costs, but does not make a profit or loss.

plans how much to produce

planning price change

ARR= (annual avg profit/cost of investment) x 100

Easy and quick to access, can get a significant amount of money at one time

Once the money is gone, it is not available for any future unseen problems the business may face

Quick, raise money from unused equipment

Might not get full market value, might need assets in the future

Have to pay interest, difficult for a new business to access

Quick access, allows emergency purchases

High interest rates, only a short term solution

Easy way to gain huge amounts of money, may offer help and advice

Owner must give away part of their business, new partner may have a different vision for the business

Quick and convenient, doesn’t require borrowing money so no interest payments to make

The owner might not have enough savings or may need the cash for personal use, once the money is gone it’s gone

Access to supplies without immediate payment, no interest

Short term, must be paid off quickly and is usually small amounts