Finance Flashcards
What is the role of finance?
To control and monitor costs and expenses to avoid financial problems
Prepare forecasts and statements
Monitor performance
What do accountants monitor
sales and what money is spent on
What is the role of managers
to plan, to organise, command, co-ordinate
Methods of short term borrowing
bank overdraft, retained profits, sales of assets, government grants, trade credit, debt factoring
Methods of long term borrowing
owner savings, bank loan, share issue, leasing, debentures, venture capital
Define liquidity
how quickly something can be changed into cash
What does a cash flow forecast show
shows money going in and money going out
What does an income statement show
shows the profits and the losses of the year
What does a statement of financial position show
shows assets and liabilities (net worth)
What are sources of cash flow problems
too much cash tied up in stock
low sales
expensive raw materials
not chasing up on late debtors
What is the purpose of financial accounts
its a legal document
provide information to stakeholders
provides transparency to enable the firm to attract investment
reduces chance of fraud
Income statement formula
Sales - CoGS = GP + I - Expenses = Profit/Loss
What is the purpose of the Statement of financial position
allows the business to meet aims and objectives
cut costs
be more flexible and adapt
be more efficient and effective
gives a guide to the degree about working capital
What is a dividend
shareholders share of the profit
What is a creditor
people who the organisation owe money to
