QuestionQuestionConceptConceptDocumentDocument

5. Finance and accounting

Start with Concept to understand a topic, then use Question Bank to check what you know.

5 topics · 13 learning objectives

Your progress

Sign in to see your mastery and mistakes.

  1. 5.1 Business finance

    1. 5.1.1Need for finance

      • The need for business finance - reasons why businesses need finance to start up, to grow and to survive - the distinction between short and long term need for finance - the difference between cash and profits - business failure as a consequence of lack of finance: bankruptcy, liquidation and administration

    2. 5.1.2Working capital

      • Working capital - the meaning and importance of working capital - managing trade receivables and trade payables - the distinction between capital expenditure and revenue expenditure

  2. 5.2 Sources of finance

    1. 5.2.1Ownership and finance sources

      • Business ownership and sources of finance - the relationship between the form of business ownership and availability of sources of finance

    2. 5.2.2Internal and external finance

      • Internal and external sources of finance - internal sources of finance: owners investment, retained earnings, sale of unwanted assets, sale and leaseback of non-current assets, working capital - external sources of finance: share capital, debentures, new partners, venture capital, bank overdrafts, leasing, hire purchase, bank loans, mortgages, debt factoring, trade credit, micro-finance, crowd funding and government grants

    3. 5.2.3Finance source factors

      • Factors affecting the sources of finance - the factors influencing the choice of sources of finance in a given situation: cost, flexibility, need to retain control, the use to which it is put, level of existing debt

    4. 5.2.4Selecting finance sources

      • Selecting the source of finance - the appropriateness of each possible source in a given situation

  3. 5.3 Forecasting and managing cash flows

    1. 5.3.1

      • Cash flow forecasts - the meaning and purpose of cash flow forecasts - the interpretation and amendment of simple cash flow forecasts: calculating opening and closing balances - different methods of improving cash flow

  4. 5.4 Costs

    1. 5.4.1Cost information

      • Cost information - the need for accurate cost information - different types of costs: fixed, variable, direct and indirect

    2. 5.4.2Costing approaches

      • Approaches to costing: full, contribution - the differences between full and contribution costing - the uses and limitations of the full costing method - the nature of the technique of contribution costing - the difference between contribution and profit - the limitations of contribution costing - situations in which contribution costing would be and would not be used

    3. 5.4.3Cost information uses

      • Uses of cost information - cost information for decision-making purposes, e.g. average, marginal, total costs - how costs can be used for pricing decisions - how costs can be used to monitor and improve business performance, including using cost information to calculate profits - contribution costing as a means to help make special order decisions

    4. 5.4.4Break-even analysis

      • Break-even analysis - the meaning and importance of break-even analysis - calculation and interpretation of break-even level of output, contribution, margin of safety and level of profit (in numeric and graphic form) - the uses and limitations of break-even analysis

  5. 5.5 Budgets

    1. 5.5.1Budgets

      • The meaning and purpose of budgets - the measurement of performance - the benefits and drawbacks from the use of budgets - the meaning and use of incremental budgets, flexible budgets and zero budgeting - the uses of budgets for measuring performance, allocating resources, controlling and monitoring a business

    2. 5.5.2Variances

      • Variances - the meaning of adverse variances and favourable variances - the calculation and interpretation of variances