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91476
Finance
Description
Business unit 2 Mind Map on Finance, created by Charlotte Webber on 15/05/2013.
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business unit 2
business unit 2
Mind Map by
Charlotte Webber
, updated more than 1 year ago
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Created by
Charlotte Webber
over 11 years ago
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Resource summary
Finance
Budgeting
Budget- delegating spending power and monitoring business performance
Budget holder- the person who is in change in seeing that the budget is kept to
Expenditure Budgets- a sum of money given to spend in a given amount on time within a department
Profit Budgets- sales revenue target for a department or whole business
Delegated Budgets- giving control in spending of the budget to departments or individuals
Benefits
motivation to staff (targets set)
Departments are given responsibilities to spend budget on what they need
Improve Efficiency
Keeps costs down
Accountability
Forward planning by looking at possible outcomes
Disadvantages
staff can become too focused on the budget, resulting in lack of care to there tasks
Demotivate staff if targets too low or high
Problems caused if one department is given a bigger budget than another
Variances
Variance- difference between planning and actual figures achieved
Adverse Variance- when difference results in lower profits
sales revenue below budget
Expenditure exceeds the budget figures
Favorable variance- when difference results in higher profit
sales revenue higher than budget
expenditure lower than budget
Improving cash flow
Causes of cash flow problems...
Lack of planning
Allowing too much credit
Overtrading- producing or purchasing too much stock
Overborrowing- high interest payments
High inflation- prices increase
seasonal factors- change of sales during the year (icecream)
Problems Caused...
Staff can't be paid
Bills can't be paid
can't invest
Can't buy materials
BANKRUPSY
Solving cash flow...
Inflows:
Sales
Reduce trade credit
Sell fixed assets
Get loads or overdrafts
Marketing
Outflows:
Better stock management
Reduce costs
Redundancies
Change suppliers or negotiate deals
Budgeting
Profit Margin= Gross Profit/ Sales x 100
Net Profit Margin= Net profit/ Sales X 100
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