topic 5 - finance

• balance sheet shows the assets, liabilities and capital at one point in time.
• profit and loss account show the profit or loss made by a business during a specific period of time.
• cash flow is how much money comes into or goes out of a business over a period of time.
• 3 types of statements

  Cash flow

  Balance sheets ( Statement of financial position)

  Income statement
• working capital equation 


  current assets - current liabilities
• capital employed


  shareholders funds + non current liabilities
• Gross profit


  revenue - variable costs
• net profit


  gross profit - expenses
• gross profit margins


  gross profit / sales revenue x 100
• net profit margin


  net profit / revenue x 100
• return on capital employed


  net profit / capital employed x 100
• current ratio 


  current assets / current liabilities
• acid test ratio


  current assets - stock / current liabilities
• Break even formula


  1.Selling price - variable costs per unit = contribution

  2.Fixed costs / contribution = break even level of output