2.3.3 - Managing finance

Calculate gross profit, operating profit and profit for the year.

Use a - profit calculations to connect the rule to the data and decision in the question.

This matters because a - profit calculations determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply a - profit calculations to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: a - Profit calculations is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Explain ways to increase profits.

Use b - increasing profits to connect the rule to the data and decision in the question.

This matters because b - increasing profits determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply b - increasing profits to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: b - Increasing profits is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Use statements of comprehensive income to calculate profitability margins and explain ways to improve profitability.

Use c - profitability statements and margins to connect the rule to the data and decision in the question.

This matters because c - profitability statements and margins determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply c - profitability statements and margins to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: c - Profitability statements and margins is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Distinguish profit from cash.

Use a - profit and cash to connect the rule to the data and decision in the question.

This matters because a - profit and cash determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply a - profit and cash to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: a - Profit and cash is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Use statements of financial position to calculate current ratio = current assets/current liabilities and acid-test ratio = (current assets − inventory)/current liabilities, interpret liquidity, and recommend ways to improve it.

Use b - liquidity ratios and improvement to connect the rule to the data and decision in the question.

This matters because b - liquidity ratios and improvement determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply b - liquidity ratios and improvement to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: b - Liquidity ratios and improvement is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Explain working capital management and the importance of cash.

Use c - working capital to connect the rule to the data and decision in the question.

This matters because c - working capital determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply c - working capital to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: c - Working capital is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Analyse internal causes such as poor cash-flow management, sales overestimation, overtrading, poor inventory control, poor marketing and poor quality.

Use a - internal causes of business failure to connect the rule to the data and decision in the question.

This matters because a - internal causes of business failure determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply a - internal causes of business failure to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: a - Internal causes of business failure is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Analyse external causes such as market conditions, competition, economic conditions, exchange rates, interest rates, regulations, suppliers and natural events.

Use b - external causes of business failure to connect the rule to the data and decision in the question.

This matters because b - external causes of business failure determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply b - external causes of business failure to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: b - External causes of business failure is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.