wjeceduqas asa level year 1 business student guide 1 business opportunities
wjeceduqas asa level year 1 business student guide 2 business functions
wjeceduqas a level year 2 business student
Connected book
Book Title:
Author(s):
Edition:
ISBN:
Edition:
More summaries for
Analysing non-financial performance
Sales forecasting
Market analysis
All for this textbook (9)
Written for
A/AS Level
WJEC
Business Studies
Component 2 - Business Analysis and Strategy
All documents for this subject (10)
Seller
Follow
AdamSidat
Reviews received
Content preview
Analysing financial performance
Budgeting
A budget is a financial plan of action covering a specific time period.
Advantages of budgets:
Budget allows managers to monitor the businesses performance against the
predicted. Allows the firm to identify when sales are growing more/less than usual.
Can motivate staff if they are paid through performance related pay.
Managers can ignore areas where there it little or no variance and can focus their
efforts on areas that require attention, i.e., where there is large variance.
Disadvantages of budgets:
Budgeting is time consuming and is an opportunity cost as time could be focused
better elsewhere.
Budgeting can result in a business making short-term decision to keep within the
budget rather than making the right long-term decision which exceeds the budget.
E.g., buying large capital will be expensive in the short-term but will increase
productivity and will decrease marginal cost allowing you to make larger marginal
profit which in the long-term will lead to large profits.
Budgets need to be changed as circumstances change, in order for it to be realistic.
This can be time consuming.
Employees excluded from the budgeting process can feel demotivated and can lead
to decreased productivity.
Managers need to know when money is coming into and out of the business. Failure to do
so can result in cashflow difficulties. Main causes for small businesses, are late or failed
payments from customers, weak sales and unexpected increase in costs.
Variance is the difference between the budgeted figure and the actual figure.
The variance can be positive or negative depending on whether it’s about revenue/sales,
costs or profit.
For revenue if the actual figure > budgeted figure its variance is favourable,
because actual revenue is greater than expected.
For revenue if the actual figure < budgeted figure its variance is adverse, because
actual revenue is less than expected.
For costs if the actual figure > budgeted figure its variance is adverse, because
actual costs are greater than expected.
For costs if the actual figure < budgeted figure its variance is favourable, because
actual costs are less than expected.
The most importance variance is: Profit variance = sales variance – costs variance
Favourable sales variance:
, Advertising – help create awareness of products and can increases sales
Fashion and trend changes – if it becomes more fashionable
Population increases
Weather/season
Substitutes price
Complements price
Economic boom
Adverse sales variance:
Bad advertising – impact brand name, decrease sales
Fashion and trend changes – if it becomes less fashionable
Population decreases
Weather/season
Substitutes price
Complements price
Economic recession
Favourable cost variance:
Costs may decrease, materials costs or rent costs
Increased productivity
Improved currency exchange rate – will make purchasing materials cheaper, will
make selling abroad cheaper as delivery will be cheaper.
Cheaper suppliers
Adverse cots variance:
Strikes by workers
Bad weather
Decreased currency exchange rate – will make purchasing materials more expensive,
will make selling abroad more expensive as delivery will become more expensive.
Unexpected rise in raw materials prices
Balance sheets
A balance sheet is a statement of a business’s assets (what a business owns) and liabilities
(what a business owes) at a specific point in time.
Assets
Non-current assets (fixed assets) – includes land, buildings, machinery and vehicles.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AdamSidat. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.80. You're not tied to anything after your purchase.