BM Finance
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| Activities carried out by finance function | Calculate employee wages/salaries prepare financial info to aid decision making monitor/control finances and expenses prepare organisations final accounts maintain accurate financial records pay accounts due/bills recieved analyse finacial info
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| Role of the Finance Department | control costs-help be more profitable monitor cash flow-corrective action if problems ensure liquidity plan 4 future-analysing past/future trends dept. make decisions-improve efficiency monitor performace-use final accounts analyse - problems-fix
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| Role of finance dept. in meeting needs of HMRC | profits calculated accurately corporation tax accurate PAYE calculated 4 all employees VAT returned regularly + calculated accurately good record keeping
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| Trading account | summary of the money that has come in (revenue) and gone out (costa) of organisation over particular period - can be done monthly and yearly
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| Sales or turnover | revenue from selling goods and/or services to customers
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| cost of sales | costs associated directly w the production/ purchase of goods from a cash and carry/ other supplier
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| gross profit/ loss | difference between sales revenue and cost of goods sols. money arisen directly from trading activities of organisation - buying low + selling high
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| profit and loss account | shows net profit or loss over specified period of time + takes into account all expenses
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| expenses | all additional expenses incurred by organisation eg. administration, distribution, selling expenses listed here
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| net profit | amount of money organisation has left once all expences deducted from sales revenue recieved. reward 4 being successful in business
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| appropriation account | shows what been done w total funds available 2 company. shows division of total funds between tax payments, investment, external loans, retention
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| Balance sheet | statement shows assets of organisation ( what it owns) and its liabilities ( what it owes to others ) at a particular point in time
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| fixed assets | items owned by organ. - will generate low income - such as property, equipment, furniture, vehicles. without these organ. unable to function
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| current assets | items owned by organ. used up, sold or converted into cash within 12 months. iclude stocks, debetors, bank balances + cash
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| current liabilities | debts owed 2 outside organs. that must be repaid in short term - less than 12 months.
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| net current assets | amount by which total value of current assets exceeds total value of current liabilities
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| net assets | shows net value of firm once short-term debts repaid
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| issued share capital | money put in organ. by the owners or shareholders. in return 4 investment recieve dividend payments
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| reserves from profit and loss account | profits retained by organ. after payment of dividends to shareholders + after provision made for all current liablities`
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| shareholders interest | all issued share value, all reserves, retained profits
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| long term liabilities | dependatures (large loans/ mortgages - debt repayment due over next 12 months
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| Value of financial accounts to competitors | check to ensure making similar % profit look @ costs eg. expenses see if ripe 4 takeover to measure other organs. market share aid decision making
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| poor cash flow problems | £ tied up in stock too much time customers 2 pay debt not enough £ from sales too short credit period by suppliers 2 high spending on machinery 2 high level of drawing taken out by owners of business
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| Solve cash flow probs | JIT - £ not tied up in stock - stock only purchased when required discounts 2 customers if pay early - encourage = £ advertising + promo = awareness= ££ sell assets - instant cash -not required - no disruption to operations
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| cash budget | forecast of money expect to recieve (Receipts) + money expect 2 pay out ( payments) over period of time in future
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| uses of info gained from cash budget | monitro prgress/performance of organ.as whole/ individual depts.assist planning+decision making assess/dem validity of business plam - help secure required finance part of business plan/expansion tool for comparison
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| benefits of preparing cash budget | identify deflict may occur - action indentify surplus- invest machinery eg motivate stqaff- targets managers control expenditure
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| employees | see if payed fair wage compared 2 profits understand decisions eg. redundancies assure organ. makes profit - job security
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| inland revenues (HMRC) | ensure corrct amount taxation being paid
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| shareholders | decide whether 2 purchase additional shares are payed a fair dividend based on profits made
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| lenders eg. bank | see if bank loan / overdraft should be issued based on profitability / liquidity
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| limitations of financial info | Not take into account : external factors eg. recession. abilities/skills/experience of staff. staff morale/motivation. new products launched. how succesful in eliminatig comp. life cycle of products
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| why take over business with poor profits | valuable assets strong brand name loyal customer base
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| Why managers use ratio analysis | compare current performance w prev. year compare organ. w similar organ. identify why differences occurs + improve use info use info 4 forecasting/ budgeting assist decision making
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| Bank loan | sum money given 2 business paid back @ later date. +regular payments +large sums requested -may not b given if bank :/ bout financial position of bus
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| overdraft | bank agrees to business takin more out than available +easy 2 arrange -charges can b expensive -only short term
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| mortgage | loan given to buy premises 4 business +long period 25 years or longer - repossesion of property if not repayed
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| Grant | +niot need repaid -only once -not huge
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| share issue | limited companies issue extra shares. plcs issue on stock market. +large amounts of capital obtained -organisations limited to no. of shares
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| leasing | rent. equipmetn +saves on purching -equipment not owned
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| hire purchase | remains property of seller till all payments made +item organisations after all payments -repossesed
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| Venture capitalists | large loans to companies that bank deny +large loans obtained - part ownership requested - expensive
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