management of finance

• Sources of Finance


  • Internal sources
  • External sources
• Owner investment


  Money ineated by the owner from their personal funds
• Retained profit


  Profit that has been invested back into the company
• Bank overdraft


  Allowed to withdraw more money from your account then is available
• Bank loan


  Money gvan by the bank that must be paid beck over a long period of time, however int must be paid on this
• Mortgage


  Sum of money barowed from the bank that is secured against a property and paid back in instalments, interest is charged
• Hire purchase


  Deposit is made and the remaining amount for the asset is paid in monthly instalments over a period
• Leasing


  Monthly payments are made, and the leasing company is responsible for the provision and upkeep of the leased nem
• Fixed costs

  Costs that do not change with how much you use them. E.g. Rent
• Variable costs


  Costs that vary with how much you use them. E.g. Electricity bills
• Total costs


  Fixed costs + variable costs
• Contribution


  Selling price - variable costs
• Total profit or loss


  Sales revenue - total costs
• Selling price


  Sales revenue / output
• Breakeven point


  Fixed costs / (sales - variable costs)
• Variable cost per unit


  (Total cost - fixed costs) / sales revenue
• Cash budgeting


  • Can identify where there may be a shortage of money
  • It can help regulate experces
  • It will show where a business has more cash than expected or less than expected
• Opening balance


  The amount of money you have available at the beginning of the month
• Receipts


  List of all the money coming INTO the business
• Payments


  List of all the money going OUT of the business
• Closing balance


  Cash left at the end of the month after all of the payments have been taken away from the business's receipts
• Income statement


  • To calculate the total cost of expenses
  • To calculate the profitfoss made of the year
  • To compare with previous years or other companies
• Sales


  Total value of goods sold to the customers
• Cost of sales


  Direct costs of the goods that they have been sold for. Calculated by adding the opening stock to purchases then subtracting the closing stock
• Gross profit


  Difference between the sales and the cost of sales
• Expenses


  All the indirect costs incurred by the business such as rent and wages
• Profit for the year


  Actual profit made by the business after all the expenses have been deducted