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TOPIC 5: FINANCE - Coggle Diagram
TOPIC 5: FINANCE
5.2
budgets:
- income budgets: forecasted budgets form sales
- expenditure budgets: expected spending of a business
- profit (or loss) budgets
process of setting a budget & difficulties:
- competitors response
- forecasting = problematic
- new market conditions = no data
variance analysis
positive variances: increase production, reduce prices if costs lower than exp., reinvest into business/ pay higher dividends
negative variances: reduce costs, increase ads, reduce prices to increase sales
benefits of budgeting:
- targets set
- inefficiency & waste are identified
- focus on decision making
- internal communication
- delegation
drawbacks of budgeting:
- inflexible
- have to be accurate to have any meaning
5.1
setting financial objectives: measure of performance, provide targets, able to assess viability of the business
revenue objectives, cost minimization, profit objectives, cash flow targets, return on investment, capital structure objectives
external influences:
- competitor actions
- market forces
- economic factors
- political factors
internal influences:
- corporate objectives
- resources available
- operational factors
5.3/4
cash flow problems: - poor management - giving too much trade credit - overtrading - unexpected expenditure
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methods of improving profits: - increasing prices - cutting costs - using capacity as fully as possible - increasing efficiency
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