Finance

Finance

Balance Sheets
1. Where the business has got its money from
  1. Where a business has spent its money
2. Produced on an annual basis
  1. At the end of the tax year (April)
3. Only shows data about the day that it is produced
4. Liabilities - How much money has been borrowed or invested and where this money has come from
  1. Current Liabilities
    1. Always changing
    2. Short term
    3. Creditors
    4. Short term loans
    5. Overdraft
    6. Dividend payments
  2. Long term Liabilities
    1. remain Constant
    2. Last for a long time
    3. Employee wages
    4. Long term loans
    5. mortgages
  3. More liabilities = less stable business
5. Assets - Where the money has been spent
  1. Fixed Assets - what the business actually owns
    1. Furniture
    2. Machinery
    3. Cost a lot, larger investment
    4. Last for a long period of time
    5. more fixed assets = more stable
    6. Hard to turn into cash
  2. Current Assets - Those which the business hold temporarily
    1. Constantly changing
    2. Stock
    3. Work in Progress
    4. Debtors
    5. Short term
    6. can be sold quickly
6. All Assets = All Liabilities
7. Ratios / Equations
  1. Working Capital Ratio = current assets / current liabilities
  2. Acid Test Ratio = Current Assets - stock / current liabilities
Proft and Loss Accounts
1. Profit and Loss Account
  1. Part two of three
  2. calculates Net Profit
  3. Profit
  4. Net Profit = Gross Profit - Overheads
2. Appropriation Axccount
  1. Calculates retained Profit
  2. Retained Profit = Net Profit befor Tax - Taxations - Dividends
  3. Part three of three
3. Trading Account
  1. Calculates Gross profit
  2. Gross Profit = Revenue - Cost of sales
  3. Part 1 of three
4. Vital for a business to have a P&L Account
5. Reserves - capital brought forward from previous months
Why does a business need finance
1. To buy resources
2. To buy premises
3. To pay staff
4. To pay off debts
5. To pay for promotion
6. To transport goods
7. To repay loans and mortgages
Cashflow Forecast / Statement
1. Cash flow Forecast
  1. PREDICTION of how much profit a business will have in upcoming months
  2. Displays all expenditures and income
  3. Displays bank balance at the start and end of every month
  4. Used to predict when a deficit may occur
2. Cash Flow statement

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