What are some sources of finance
- bank loan
- mortgage
- loan from family and friends
- Government grants
- Overdraft
- Owners savings
- Selling Shares
Advantages/Disadvantages of a Bank Loan
+ Budgeting and planning is easier as repayments are made in regular fixed instalments
- Must repay the amount plus interest
Advantage/Disadvantage of a mortgage
+ Can be taken over a long period of time.
Interest rates will be lower than a bank loan
- If interest rates change then repayments may increase
Advantage/Disadvantage of Loans from Family and Friends
+ No interest is required to be paid
- Disagreement could occur when the money is not repaid on time
Advantage/Disadvantage of Government Grants
+ The money doesn’t have to be repaid
- Can be difficult to reveive as large aounts of paperwork may ahve to be completed.
- Conditions may also apply
Advantages/Disadvantages of a Overdraft
+ Can be agreed in advance, and for many firms a permanent faclity can be available
- Interest rates can be quite high
- Amount has to be paid in full at agreed time
Advantages/Disadvantages of Owners Savings
+ Allows the owner to keep control of the business of the business
+ It can reduce the amount to be borrowed from other sources
- Risk that the owner could lose his savings if the business fails
Advantages/Disadvantages of Selling Shares
+ A large amount of money can be raised
+ Don’t have to pay the money back
+ No interest has to be paidl
- Dividends have to be paid to shareholders
- New shareholders will have a say in how the business is run
-Only available to Ltd/Plc
What are fixed costs
Costs that do not change in the short term in relation to output or sales
What are variable costs
Costs which change in relation to ouput or sales
What is the Total costs
Fixed Costs + Variable Costs = Total Costs
What is the total revenue
The total amount of money received from selling goods and services
Total Revenue = Selling Price * Units Sold
What is the break even point
When a business has covered all their costs and aren’t making a profit or a loss
What are features in a Cash Budget
Opening Balance - the amount of money in the bank at the start of the month
Total Income - The money received into the busisness
Total Expenses - any amounts that have been paid out of the business
Closing Balance - the amount of money left in the business at the end of the months trading
What does a Cash Budget do
- shows how much cash the organisation has available each month
- shows total amount of money received and paid during the month
- alerts the business to any cash flow problems
- is used to help make decisions
- can be used to forecast whether a loan or overdraft may be necessary.
What are the benefits of using a cash budget
- To show if the business will have a surplus.
- It can show if additional finance is required eg overdraft or loan.
- It can help control expenses by highlighting periods when expenses could be high.
- It can help the decision making.
Outline features on a income statement
- Sales revenue - the total money recieve by selling a product/service
- Cost of Sales - the cost of buying products to sell to customers
- Gross Profit - profit from buying and selling goods
Sales Revenue - Cost of Sales = Gross Profit - Profit for the Year - the profit after all expenses have been paid
Gross Profit - Total expenses = Profit for the Year
How can spreadsheets be used in finance
To prepare:
* Staff Wages/Salaries
* Cash Budgets
* Income/Profit Statements
* Create Graphs and Charts showing income and expenditure
What are some benefits of Spreadsheets
- Carry out automatic calculations
- Create graphs to show trends in sales/profits
- Prepare information which can be exported to other packages
- Information can be updated and edited quickly
- Templates can be created for financial information such as cash budgets
How can Databases be used in finance
- used to keep records of suppliers’ accounts due and/or customers’ accounts owed.
How can Word Processing be used in finance
- Word Processing software can be used to create documents informing departments of their annual budget figure or for Shareholders’ Annual Financial Reports.
How can powerpoints be used in finance
Presentation software can be used to display financial information for staff meetings,
How can online banking be used in finance
Business can manage their bank accounts online to pay employees, suppliers, electricity bills, electronically.
