M2- topic 3 process of financial managment Flashcards

1
Q

how are the businesses financial needs determined (4)

A

size of the business
phase of the business cycle
future plans for growth and development
capacity to source finance

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2
Q

what are operating budgets

A

budgets relating to the main activities of a business

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3
Q

what are financial budgets

A

Budgets that relate to the financial data of the business

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4
Q

what types of record keeping are there (2)

A

manual record keeping

Electric record keeping

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5
Q

advantages of using a manual record keeping (2)

A

less expensive

less chance of data loss

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6
Q

disadvantages of using manual record keeping (2)

A

manually enter data

time consuming

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7
Q

advantages of using electric record keeping (2)

A

more efficient

more organised

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8
Q

disadvantages of using electrical record keeping (2)

A

data loss risk

expensive

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9
Q

what is financial control

A

financial policies and procedures that ensure the plan of the business is achieved

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10
Q

what ways can you finance a business (2)

A

debt

equity

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11
Q

what is an example of debt (2)

A

overdraft

mortgage

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12
Q

what is an example of equity (2)

A

retained profits

owners equity

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13
Q

advantages of debt (2)

A

funds can be acquired on short notice

doesn’t require selling share

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14
Q

disadvantages of debt (2)

A

Regular payments must be made and cause stress

debt is expensive (intrest)

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15
Q

advantages of equity (2)

A

no pressure from banks and lenders

low gearing

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16
Q

disadvantages of equity (2)

A

slow growth

ownership can be diluted

17
Q

what the rule with debt

A

use long term debt for long term assets and short term debt for short term assets

18
Q

what do cash flow statements indicate (2)

A

The movement of cash into and out of the business

Firms ability to pay its debts

19
Q

how are the businesses activities split up (3)

A

operating activities
investing activities
financing activities

20
Q
what are operating activities and
list examples(3)
A

The main cash inflows and outflows relating to the Business. e.g.

  • bills
  • rent
  • stock
21
Q
what are investing activities and
 list examples (2)
A

The cash inflow and outflows relating to the purchase of non current assets. e.g.

  • new equipment
  • renovation
22
Q
what are financing activities and
list examples (3)
A

the cash inflows and outflows relating to borrowing activities of the business e.g.

  • debt
  • mortgage
  • overdraft
23
Q

what do income statements indicate

A

the profitability of the business

24
Q

what is gross profit

A

the amount earned from production

25
Q

what is net profit

A

the take home profit

26
Q

how to calculate COGS

A

opening stock + purchases - closing stock

27
Q

how to calculate gross profit

A

sales revenue - COGS

28
Q

how to calculate net profit

A

gross profit- expenses

29
Q

what do balance sheets do (2)

A

Give a snapshot of what the business owns at a specific time

Shows the businesses financial stability (gearing)

30
Q

what is owners equity

A

funds contributed by the owner

31
Q

what does owners equity represent

A

the net worth of the business

32
Q

how to calculate assets on a balence sheet

A

liabilities + owners equity