finance

• what is the role of the finance department?

  • forecasting trends
  • pay bills and expenses
  • chasing debtors and invoicing
  • budgeting and controlling costs
• what are short-term sources of finance?

  • bank overdraft
  • trade credit
  • owners savings
  • asset stripping
  • debt factoring
• What are long-term sources of finance?

  • Leasing
  • bank loan
  • hire purchase
  • retained profits
  • debentures
  • crowd funding
• what are reasons to prepare a statement of financial position?

  to state the value of the organisation

  it is a legal requirement

  can be used to calculate ratios

  compare with previous years and competitors
• what are non-current assets?

  things that a business owns for more than a year
• what are current assets?


  things a business owns for less than a year
• what are current liabilities?

  things that a business owes for less than a year
• what are non-current liabilities?

  Long-term debts payed back in over a year
• what is working equity?

  the difference between current assets and current liabilities
• what are the profitability ratios?

  gross profit percentage = gross profit divided by sales revenue x 100

  profit of the year percentage = profit for the year divided by sales revenue x 100
• what are the liquidity ratios?

  working equity = current assets divided by current liabilities = _:1

  acid test = current assets - inventory divided by current liabilities
• what are the efficency ratios?

  Return on equity employed (ROE) ;profit for the year divided by equity employed x 100 __percent

  rate of inventory turnover: cost of sales divided by avg inventory =_times
• what are some cash flow problems?

  falling sales revenue

  declining closing balance

  consistently high fixed expenses

  too much money tied up in stock
• what are some reasons to prepare a cash budget?

  • to plan areas for production and possible sales as to have enough inventory
  • to set budgetary targets to increase staff productivity and motivation
  • to compare actual and estimated performance for future planning and better decision making
  • to plan for areas of deficit so finance can be arranged