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    CIE IGCSE Business Unit 5 Revision Pack

    Uploaded by

    ctirsina

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    © All Rights Reserved
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    CIE IGCSE Business Unit 5 Revision Pack

    Uploaded by

    ctirsina
    1 views42 pages

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    © © All Rights Reserved

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    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    1 views42 pages

    CIE IGCSE Business Unit 5 Revision Pack

    Uploaded by

    ctirsina

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 42

    Unit 5

    Revision booklet
    What do
    finance
    departments
    do?
    What would require What would require
    short term finance? long term finance?

    Wages Developing a new


    product

    Why might
    a business
    need
    finance?
    Sources of finance
    • Internal finance

    • External finance

    • Short term finance

    • Long term finance

    • Revenue expenditure

    • Capital expenditure
    Benefits Limitations Benefits Limitations

    Internal
    finance

    Benefits Limitations Benefits Limitations


    External finance Benefits Limitations

    Short
    term

    Benefits Limitations Benefits Limitations


    External finance Benefits Limitations

    Long term

    Debt finance
    (money has
    to be repaid)

    Benefits Limitations Benefits Limitations


    External finance Benefits Limitations

    Long term

    Permanent
    capital
    (money does
    not have to
    be repaid)

    Benefits Limitations
    External finance Benefits Limitations

    Long term

    Other types
    (reduces the
    need for full
    upfront
    payment)

    Benefits Limitations
    Microfinance
    How would a
    business
    choose which
    source of
    finance to use?
    Will
    Will
    banks shareholders
    lend? invest?
    What is cash flow?

    Why is cash important to a


    business ?

    Cash inflows (definition


    and examples)

    Cash outflows
    (definition and examples)

    Net cash flow

    Opening cash (or bank)


    balance

    Closing cash (or bank)


    balance
    Cash flow cycle
    MONTH 1 MONTH 2
    CASH INFLOWS
    Personal finance 11 0
    Sales 5 4
    Debtors 0 5
    Total inflow A 9
    CASH OUTFLOWS
    Overheads 6 6
    Wages 2 3
    Materials 1 2
    Total outflow 9 D
    NET CASH FLOW Net cash flow B (2)
    Opening balance 1 E
    Closing balance C F
    MONTH 1 MONTH 2
    CASH INFLOWS
    Personal finance 11 0
    Sales 5 4
    Debtors 0 5
    Total inflow 16 9
    CASH OUTFLOWS
    Overheads 6 6
    Wages 2 3
    Materials 1 2
    Total outflow 9 11
    NET CASH FLOW Net cash flow 7 (2)
    Opening balance 1 8
    Closing balance 8 6
    Uses of
    cash flow
    forecasts
    Overcoming
    a cash flow
    problem
    The
    importance
    of working
    capital
    Income statements

    What are
    accounts and
    why are they
    necessary
    Description Formula

    Revenue

    Cost of sales

    Gross profit

    Expenses

    Profit

    Income
    statement
    Why is profit important?

    In social
    enterprises
    In the
    private
    sector

    In the
    public
    sector
    Components/features of income statements

    Income
    statements
    are made
    up of
    Uses of
    income
    statements
    2021 $
    Revenue
    55,000
    Cost of sales
    33,000
    Gross profit
    A
    Expenses
    8,000
    Profit
    B
    Tax @ 13% of net profit
    C
    Post-tax profit
    D
    Retained profit 70%
    E
    Dividend 30%
    F
    2021 $
    Revenue
    55,000
    Cost of sales
    33,000
    Gross profit
    22,000
    Expenses
    8,000
    Profit
    14,000
    Tax @ 13% of net profit
    1,820
    Post-tax profit
    12,180
    Retained profit 70%
    8,526
    Dividend 30%
    3,654
    Description Examples

    Current Assets

    Fixed assets

    Current
    liabilities

    Non-current
    liabilities

    Shareholder
    equity

    Balance Sheet
    Statement of financial position a.k.a. Balance sheet

    Elements
    of the
    balance
    sheet
    A=
    B=
    C=

    C
    Statement of financial position a.k.a. Balance sheet

    Interpreting
    balance
    sheet data
    Ratios
    • Profitability is...

    • Liquidity is...
    Liquidity
    ratios

    Profitability
    ratios
    2021 $
    2021
    Revenue 55,000
    GPM
    Cost of sales 33,000 PM

    Gross profit 22,000 ROCE

    Expenses 8,000
    2022
    profit 14,000 GPM 30%

    Tax @ 13% of net 1,820 PM 20%


    profit
    ROCE 12%
    Post-tax profit 12,180
    Comment on the business’ performance
    Retained profit 8,526
    70%
    Dividend 30% 3,654

    Capital employed 175,000


    Current ratio =

    Acid test ratio =


    Current ratio =
    1:1.6

    Acid test ratio = 1:1.4


    Uses and users of accounts

    Users of
    accounts (explain
    how the
    accounts are
    used by each)
    Uses and users of accounts

    Limitations of
    using
    accounts and
    ratio analysis

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