Other
Finance revision notes
- Institution
- PEARSON (PEARSON)
Includes all formulas and summarised topics in Pearsons BTEC Business revision guide.
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
Seller
Follow
Content preview
Formulas: Profit = Sales/revenue - total costs
Revenue = price x quantity sold
Total costs + total fixed costs + total variable costs
Total variable costs = variable cost per unit x quantity sold
Margin of safety – expected sales – breakeven
Breakeven = fixed costs/sales price – variable costs
Profit = margin of safety x contribution
Net cashflow = total inflow – total outflow
Closing balance = opening balance + net flow
Gross profit = sales – cost of sales
Net profit = gross profit – expenses
Cost of sales = open inventory + purchases – closing inventory
Straight line depreciation = asset cost – salvage value/useful life
Net current assets/working capital = current asset – current liabilities
Equity = current asset + non-current assets – current liability – non-current liability
Ratios:
Net profit margin + net profit/sales x 100
Gross profit margin = gross profit/sales x 100
Mark up = gross profit/cost of sales x 100
ROCE (capital employed) = net profit/capital employed (net asset) x 100
Current ratio = current asset/current liabilities
Trade receivable days = trade receivable/credit sales x 365
Trade payable days = trade payable/credit purchases x 365
Inventory turnover = average inventory/cost of sales x 365
Average inventory = opening + closing inventory/2
Adv: easy comparison, this year to last year, one business to another business
Dis: uses old data, hard to compare businesses, some businesses do theirs in a different way, tells
the story of the whole department not different departments, can’t establish the cause
Business Finance:
Breakeven graph: the point at which the business makes either a loss or a profit
Dis: time consuming/not practical– have to do breakeven for every product
Unrealistic assumptions – price changes, breakeven will have to be done several
times
When variable cost increases, break even increases
High selling price, lower breakeven point
Margin of saftey – the amount of sales the business can lose before they make a financial loss
, Depreciation: spread the cost of a tangible or physical asset over its useful life
Non-current assets/fixed assets: more than one year
Straight line depreciation: adv: loses the same amount each year, quick
Dis: not accurate
Reducing balance: adv: more accurate
Dis: loses different amount each year
Current assets: less than one year
Trade receivables/debtors – customers buy on credit
Trade payables/creditors – business buy on credit
Accounting: Systematic recording, analysis and reporting of financial transactions
Fraud- when an individual acquires company’s money for personal gain through illegal action
Key areas of accounting usage:
Recording transaction
Helping the management of the business
Staying compliant with the law
Income statements: calculates whether the firm has made a profit/loss by deducting all expenses from
sales revenue
Income: money coming into the business
Revenue income – sales e.g. cars
Capital income – money coming from somewhere else/fixed assets e.g. loans
Collateral – if the business fails to meet the loan repayments the bank can claim back the assets secured
against it
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 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 muhsinaa. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £3.06. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53022 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now