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539211
Unit 8- Finance 1
Description
Business Studies
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gcse
Mind Map by
louise.robson98
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louise.robson98
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Resource summary
Unit 8- Finance 1
Why does a growing business need finance?
More storage
New premises, vehicles, factory
More stock
Training more staff to make products
Diversification
Spreads risk of the business failing into different sectors
Advertising
Easier for a growing business to obtain finance as they have a credit history
Sources of finance for a growing business
Debtors (external)
Selling unwanted assets (internal)
Using retained profits (internal)
Selling more shares (external)
Loan or mortgage (external)
Profit and Loss Accounts
Purpose
Calculates retained profit
Legal requirement
Public Limited Companies accounts have to be public (so potential shareholders can view previous accounts)
3 parts
Trading Account
Calculates: Gross Profit= Revenue- Cost of sales
Profit and Loss Account
Calculates: Net Profit= Gross profit- Operating costs
Appropriation Account
Calculates: Net Profit before tax= Net Profit- Interest
Calculates: Retained Profit= Net Profit before tax- taxation and dividends
Balance Sheets
Shows where the money has gone
Assets must equal liabilities
Assets= Something the company owns
Fixed Assets= Hard to turn into cash easily i.e. properties and vehicles
Current Assets= Easier to turn into cash i.e. cash in hand and stock
Liabilities= Something the business owes
Long term= Mortgage
Short term= Trade Creditors, Tax on profits, bank loans
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