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AS Business Studies
Business Activity
Resources – the inputs that are used in the production process to produce goods and services
...
It provides a managing, decision making and co-ordinating role
...
g
...
Consumer Services – non-tangible products that are sold to the general public e
...
hotel
accommodation, insurance services, train journeys
Capital Goods – physical goods that are used by industry to aid in the production of other goods and
services e
...
machines, commercial vehicles
Primary Sector – those firms engaged in the extraction of natural resources so that they can be used
and processed by other firms
Secondary Sector – those firms that manufacture and process products from natural resources
Tertiary Sector – those firms that provide services to consumers and other businesses
Public Sector – comprises of organization accountable to and controlled by central or local
government (the state)
Private Sector – comprises of businesses owned and controlled by individuals or groups of
individuals
0
0
Enterprise
Entrepreneur – someone who takes the financial risk of starting and managing a new business
venture
...
g
...
g
...
Without
record keeping, the organisation of the business will be poor, causing poor relationships
with suppliers and customers, as well as making decisions more time consuming and
possibly affecting staff morale
...
This can be done through establishing a relationship with the
bank to ensure short term and long term solutions or by using effective credit control for
customers
...
Poor management skills – there may be poor leadership skills, cash handling and cash
management, planning and coordinating, decision making skills, communication skills, or
marketing, promotion and selling skills
...
Changes in the business environment – new competitors, legal changes (e
...
safety
regulations), economic changes (e
...
during a recession) and technological changes may
cause a loss in profits
...
Advantages
Total national output (GDP) increases and this
raises standards of living
Increasing output of goods can result in lower
imports and higher exports of such products
Value is added to the countries’ output of raw
materials, rather than just exporting these as
basic, unprocessed products
Expanding and profitable firms will pay more tax
to the government
Expanding manufacturing businesses will result
in more jobs being created
0
Disadvantages
The chance of work in manufacturing can
encourage a huge movement of people from the
countryside to the towns, which leads to housing
and social problems
Imports of raw materials and components are
often much needed, which can increase the
country’s import costs
Much of the growth of manufacturing industry is
due to the expansion of multinational companies
0
Economies
Economy – the state of a country or region in terms of the production and consumption of goods
and services, and the supply of money
Mixed Economy
Mixed Economy – economic resources are owned and controlled by both private and public sectors
Advantages
It has the advantage of taking the benefits of
capitalist nature of private companies and
socialist nature of government
...
Limited Liability – the only liability, or potential loss, a shareholder has if the company fails is the
amount invested in the company, not the total wealth of the shareholders
...
Partners are bound by the terms of the
Partnership Act 1890
...
These have limited liability
...
0
0
Share – a certificate confirming part ownership of a company and entitling the shareholder owner to
dividends and certain shareholder rights
Shareholder – a person or institution owning shares in a limited company
Limited Companies – incorporated business with limited liability, a separate legal personality and
continuity of a business
...
To do this they must complete:
Memorandum of Association
o Details the name of the company
o Details the address of the head office
o Details the maximum share capital for which the company seeks authorisation
o Details the companies declared aims
Articles of Association
o Details the internal workings of the business and control of the business e
...
it
details the names of directors and the procedure to be followed at meetings
Private Limited Companies – an incorporated business that is owned by shareholders but does not
have the legal right to offer shares for sale to the public
Advantages
Shareholders have limited liability
Separate legal personality
Continuity in the event of a shareholder’s death
Able to raise capital from sale of shares to
family, friends and employees
Original owner is still often able to retain control
Greater status than an unincorporated business
Disadvantages
Legal formalities involved in establishing the
business
Quite difficult for shareholders to sell shares
Capital cannot be raised by sale of shares to the
general public
End of year accounts must be sent to Companies
House – available for public inspection there
Public Limited Companies – an incorporated business that has the legal right to offer shares for sale
to the public
...
g
...
Consumer Cooperatives – members buy goods in bulk, sell them, and divide the profits between
members
Worker Cooperatives – workers buy the business and run it; decisions and profits are shared by the
members
...
Franchise businesses
have a lower failure rate than non-franchise firms
...
Advantages
Costs and risks of a new business venture are
shared
Different companies might have different
strengths and experiences and they therefore fit
well together
They might have their major markets in different
countries and they could exploit these with the
new product more effectively than if they both
decided to ‘go it alone’
0
Disadvantages
Errors and mistakes might lead to one blaming
the other for mistakes
The business failure of one of the partners would
put the whole project at risk
Styles of management and culture might be so
different that the two teams do not blend well
together
0
Holding Companies – a business organisation that owns and controls a number of separate
businesses, but does not unite them into one unified company
...
The holding company has diversified interests
...
They often do not
have profit as a main objective
...
Stakeholders can influence what a business does, and as they will be affected by the business, they
will try to get the business to do what they want
...
It is the
simplest method and easy to understand, however it does not represent a business which
requires little amounts of workers
...
It is often used
when comparing industry businesses
...
g
...
However comparisons in different industries may be misleading e
...
a hair dresser and an
optician
Market Capitalisation – businesses with higher market capitalisation are generally larger,
however it can only be used with businesses that have shares on the stock exchange
...
Market Share – if a business has a high market share then it must be among the leaders in the
industry or comparatively large
...
Capital Employed – the total value of all long-term finance invested in the business
Market Capitalisation – the total value of a company’s issued shares
MARKET CAPITALISATION = current share price current no
...
g
...
g
...
Aim – where the business wants to go in the future; its goals
...
Strategy – the long-term plans of action of a business that focus on achieving its aims
Tactic – short-term policy or decision aimed at resolving a particular problem or meeting a specific
part of the overall strategy
Why set aims?
They highlight key areas of development
They help businesses keep a focus upon key areas
They outline the ‘destination’ of where the company wants to reach
Provides a framework which strategies and plans can be drawn up
Mission Statement – a statement of the business’ core aims, phrased in a way to motivate
employees and to stimulate interest by outside groups
...
These form the foundation for the strategic plans for the business
...
SMART – Specific, Measurable, Achievable, Realistic, Time Specific
Why set Objectives?
Objectives give the business a clearly defined target
Enables businesses to measure progress towards its aims
Can help motivate employees
0
0
Factors that determine Objectives
Size and Legal Form – Smaller businesses will be more concerned with survival or satisficing,
whereas larger business may be more concerned rapid business growth or profit maximisation
...
Culture is about people, how they
perform and deal with others, how aggressive they are in the pursuit of objectives and how
adaptable they are in the face of change
...
Number of Years in Operation – newly formed businesses are likely to be driven by survival
...
Common Corporate Objectives
Profit Maximisation – private sector firms want to gain the highest profit through increasing
revenue and decreasing costs of production
Growth – this is usually measured in terms of sales or value of output; growth can reduce risk of
takeovers, appeal to new competitors, and motivate managers
Maximising shareholder value – helps to direct management action towards taking decisions
that would increase share price and returns to shareholders
Increasing Market share – indicates that the marketing mix of the business is proving to be more
successful than that of its competitors
...
Maximising short-term sales revenue – would benefit managers and staff when salaries and
bonuses are dependent on sales revenue levels
Survival – likely to be key objective of most new business start-ups
...
Profit Satisficing – aiming to achieve enough profit to keep the owners happy but not aiming to
work flat out to earn as much profit as possible
...
Corporate Social Responsibility
Stages in Decision Making
1
...
3
...
5
...
7
...
They directly produce goods or resources and use
social aims and ethical ways to achieve them
...
Triple Bottom Line – three main aims of Social Enterprises:
Social – provide jobs or support for local, often disadvantaged communities
Economic – make a profit to reinvest some of it back into the business and provide some
return to owners
Environmental – to protect the environment and to manage the business in an
environmentally sustainable way
...
Improvement in the number and quality of
employee applications
Reasons against CSR
Cost involved in ensuring a socially responsible
approach
Reduction in Profits
Distraction from main business activity
In developing countries, it is argued that
economic growth is more important than CSR
Businesses just using it for publicity not actually
doing it for society
Ethics – the moral guidelines that determine decision making
Ethical Code – a document detailing a company’s rules and guidelines on staff behaviour that must
be followed by all employees
Social Audit – a report on the impact a business has on society – this can cover pollution levels,
health and safety record, sources of supplies, customer satisfactions and contribution to the
community
...
Problems with Social Audits
Timely and expensive to produce
May be used as a publicity stunt by companies
Due to them not being compulsory, companies may not take them seriously
0
0
Finance
Start-up Capital – the capital needed by an entrepreneur to set up a business
Working Capital – the capital needed to pay for raw materials, day-to-day running costs and credit
offered to customers
...
It needs to be managed effectively by concentrating on the four main components:
Debtors
o No extending credit to customers
o Debt factoring
o By being careful to discover whether new customers are creditworthy
o By offering discount to clients who pay promptly
Credit
o Increasing the range of goods and services bought on credit
o Extend the time taken to pay
Inventory
o Keeping smaller inventories
o Using technology to enhance re-ordering
o Efficient inventory control
o Use Just in Time (ordering stock just before necessary)
Cash
o Use of cash flow forecasts
o Wise use or investment of excess cash
o Planning for periods where there may be insufficient cash inflows
Sell On
Credit
Production
Cash
Materials
and Stock
0
0
Liquidity – the ability of a firm to be able to pay its short-term debts
Liquidation – when a firm ceases trading and its assets are sold to pay for suppliers and creditors
Insolvent – when a business cannot meet its short-term debts
Capital Expenditure – the purchase of assets that are expected to last for more than one year, such
as building or machinery
Revenue Expenditure – spending on all costs and assets other than fixed assets and includes wages
and salaries and materials bought for stock
Business Plan – a detailed document giving evidence about a new or existing business, that aims to
convince external lenders and investors to extend finance to the business
Why do businesses need finance?
Expansion
Purchasing of assets
Special situations – decline in sales, economic downturn
Setting up a business
Working Capital
Takeovers or acquisitions
Equity Finance
Equity Finance – permanent finance raised by companies through the sale of ownership of the
business/shares
...
This sale of shares can be
undertaken in two main ways:
o Public issue by prospectus
o Arranging a placing of shares with institutional investors without the expense of a
full public issue
...
Rights Issue – existing shareholders are given the right to buy additional shares at a discounted price
Internal Sources of Finance
o
o
o
Retained Profit – earned profit that is not taken as tax or used to pay owners or shareholders
Once invested back into the business the retained earnings will not be paid out
Newly formed companies or ones trading at a loss will not have access
Sale of Assets
Assets can be sold to leasing company and leased back
Opportunity cost of selling assets that could be used in the future
Reductions in Working Capital
Money raised through selling assets or reducing debt
Firm’s liquidity may be reduced to risky level
0
0
External Sources of Finance
Short-Term
o Bank Overdraft – bank agrees to a business borrowing up to an agreed limit as and when
required
Amount raised can vary from day-to-day
Often High Interest Rates, Bank can ‘call in’ overdraft – force firms to pay back
Debt Factoring – selling of claims over trade receivables to a debt factor in exchange for
immediate liquidity
Any debts to the business can be received immediately
Only a proportion of the value of the debts will be received as cash
o Trade Credit – delaying the bills for goods and services to suppliers or creditors
Extra existing finance, no interest rates must be paid for this ‘loan’
Supplier confidence lost, quick payment discounts lost
Medium-Term
o Leasing – obtaining the use of equipment or vehicles and paying a rental or leasing
charge over a fixed period
Avoids raising long-term capital to buy assets, leasing company repairs/upgrades
Periodic payments may total more than one payment, asset returned after use
o Hire purchase – when an asset is sold to a company that agrees to pay fixed repayments
over an agreed time period
The asset belongs to the company, purchase made over time
Periodic payments may total more than one payment
o Medium-term Loan
Bank can supply large sum quickly
Interest rates must be paid back to bank, collateral must be provided
Long-Term
o Share Issue – selling some ownership of the business to investors
Nothing needs to be paid back
Ltds cannot sell shares publicly, expensive to join stock exchange, risk of
takeovers, some loss of ownership,
o Debentures – bonds issued by companies to raise debt finance, often with a fixed rate of
interest
Usually not secured on an asset, convertible debentures can be turned into
shares overtime so the company issuing them will not have to pay it back
Company must pay fixed rate of interest each year up to 25 years, if secured on
an asset and the firm ceases trading the investors may sell the asset
o Long-term Loan – loans that do not have to be repaid for at least one year
Bank can supply a large sum quickly that does not have to be paid back for
awhile
Interest rates must be paid back to bank, collateral must be provided
o Grants – money donated to the business by outside agencies
Do not have to be repaid if conditions are met
Difficult to receive – the business has no choice over who gets the grants
o
0
0
Other Sources of Finance
Venture Capital – risk capital invested in business start-ups or expanding businesses that have good
profit potential but do not find it easy to gain finance from other sources
Microfinance – providing financial services for poor and low-income customers who do not have
access to banking services, such as loans and overdrafts offered by traditional commercial banks
Crowd Funding – the use of small amounts of capital from a large number of individuals to finance a
new business venture
Factors Influencing Choices of Finance
Use of finance
Size of existing borrowing
Flexibility of firm’s need for finance
Legal structure and desire to retain control
Amount required
Cost of debt
Time period for which finance is required
Existing assets of the firm
Costs
Fixed Costs – costs which do not change with output
...
Direct Costs – costs that can be clearly identified with each unit of production and can be allocated
to a cost centre
Indirect Costs – costs that cannot be identified with a unit of production or allocated accurately to a
cost centre
Marginal Costs – the extra cost of producing one more unit of output
Total Costs – all costs required in the production process
TOTAL COSTS = Fixed Costs + Variable Costs
Revenue – total value of sales made by a business in a given time period
TOTAL REVENUE = Price x Quantity
Profit/Loss – how much money the firm has made once costs of production have been taken into
account
PROFIT/LOSS = Total Revenue – Total Cost
0
0
Break Even Analysis
Breaking Even – the level of output where total revenue is equal to total cost
BREAKEVEN POINT OF OUTPUT =
Contribution – how much per unit a company’s variable cost can contribute to paying the fixed costs
...
CONTRIBUTION = Selling Price – Variable Cost
Margin of Safety – the difference in terms of units of production, between the current production
level and the break-even level
Total Revenue
Total Costs
$
Variable Costs
Break Even
Point
Margin of Safety
Fixed Costs
Output
Advantages
Charts are relatively easy to construct and
interpret
...
Comparisons can be made between different
options by constructing new charts to show
changed circumstances
...
The equation produces a precise breakeven
result
...
There is no allowance made for inventory levels
on the break-even chart
...
This is unlikely to always
be the case
...
Not all costs can be conveniently classified into
fixed and variable costs e
...
electricity
0
Accounting
Financial Accounting
Collection of data on daily transactions
Preparation of the published report and
accounts of a business – statement of financial
position, income statement and cash statement
Information is used by external groups
Accounts are usually prepared once or twice a
year
Accountants are bound by the rules and
concepts of the accounting profession
Covers pasts periods of time
Management Accounting
Analysing internal accounts such as budgets
Preparation of information for managers on any
financial aspect of a business, its departments
and products
Information is only available to internal users
Accounting reports and data prepared as and
when required by managers and owners
Not set rules – accountants will produce
information in the form requested
Can cover past time periods, but can also be
concerned with the present or projections into
the future
Accounting Concepts and Conventions
The Double-Entry Principle: Every time a business engages in a transaction e
...
buying materials,
there are two sides to the transaction
...
If no adjustment was made for this accrued expense, then
the profits in the current accounting period will be overstated
...
All accounting data are converted into money – hence
the principle of money measurement
...
Conservatism/Prudence Concept: Accountants are trained to be realistic about the values used in
accounts
...
Profits, on the other hand, should not be recorded until it is certain
that goods or services have been sold at a profit and not a loss
...
So sales are not recorded when an order is taken or when payment is actually
made – but when the goods or services have been provided to the customer
...
g
...
They directly produce goods or resources and use
social aims and ethical ways to achieve them
...
Triple Bottom Line – three main aims of Social Enterprises:
Social – provide jobs or support for local, often disadvantaged communities
Economic – make a profit to reinvest some of it back into the business and provide some
return to owners
Environmental – to protect the environment and to manage the business in an
0
0
environmentally sustainable way
...
Improvement in the number and quality of
employee applications
Reasons against CSR
Cost involved in ensuring a socially responsible
approach
Reduction in Profits
Distraction from main business activity
In developing countries, it is argued that
economic growth is more important than CSR
Businesses just using it for publicity not actually
doing it for society
Ethics – the moral guidelines that determine decision making
Ethical Code – a document detailing a company’s rules and guidelines on staff behaviour that must
be followed by all employees
Social Audit – a report on the impact a business has on society – this can cover pollution levels,
health and safety record, sources of supplies, customer satisfactions and contribution to the
community
...
Problems with Social Audits
Timely and expensive to produce
May be used as a publicity stunt by companies
Due to them not being compulsory, companies may not take them seriously
0
0
Finance
Start-up Capital – the capital needed by an entrepreneur to set up a business
Working Capital – the capital needed to pay for raw materials, day-to-day running costs and credit
offered to customers
...
It needs to be managed effectively by concentrating on the four main components:
Debtors
o No extending credit to customers
o Debt factoring
o By being careful to discover whether new customers are creditworthy
o By offering discount to clients who pay promptly
Credit
o Increasing the range of goods and services bought on credit
o Extend the time taken to pay
Inventory
o Keeping smaller inventories
o Using technology to enhance re-ordering
o Efficient inventory control
o Use Just in Time (ordering stock just before necessary)
Cash
o Use of cash flow forecasts 0
0
o Wise use or investment of excess cash
o Planning for periods where there may be insufficient cash inflows
Sell On
Credit
Cash
Production
Materials
and Stock
0
0
Liquidity – the ability of a firm to be able to pay its short-term debts
Liquidation – when a firm ceases trading and its assets are sold to pay for suppliers and creditors
Insolvent – when a business cannot meet its short-term debts
Capital Expenditure – the purchase of assets that are expected to last for more than one year, such
as building or machinery
Revenue Expenditure – spending on all costs and assets other than fixed assets and includes wages
and salaries and materials bought for stock
Business Plan – a detailed document giving evidence about a new or existing business, that aims to
convince external lenders and investors to extend finance to the business
Why do businesses need finance?
Expansion
Purchasing of assets
Special situations – decline in sales, economic downturn
Setting up a business
Working Capital
Takeovers or acquisitions
Equity Finance
Equity Finance – permanent finance raised by companies through the sale of ownership of the
business/shares
...
This sale of shares can be
undertaken in two main ways:
o Public issue by prospectus
o Arranging a placing of shares with institutional investors without the expense of a
full public issue
...
Rights Issue – existing shareholders are given the right to buy additional shares at a discounted price
Internal Sources of Finance
o
o
Retained Profit – earned profit that is not taken as tax or used to pay owners or shareholders
Once invested back into the business the retained earnings will not be paid out
Newly formed companies
trading at a loss will not have access
0 or ones
0
Sale of Assets
Assets can be sold to leasing company and leased back
o
Opportunity cost of selling assets that could be used in the future
Reductions in Working Capital
Money raised through selling assets or reducing debt
Firm’s liquidity may be reduced to risky level
External Sources of Finance
Short-Term
0
0
o Bank Overdraft – bank agrees to a business borrowing up to an agreed limit as and when
required
Amount raised can vary from day-to-day
Often High Interest Rates, Bank can ‘call in’ overdraft – force firms to pay back
o Debt Factoring – selling of claims over trade receivables to a debt factor in exchange for
immediate liquidity
Any debts to the business can be received immediately
Only a proportion of the value of the debts will be received as cash
o Trade Credit – delaying the bills for goods and services to suppliers or creditors
Extra existing finance, no interest rates must be paid for this ‘loan’
Supplier confidence lost, quick payment discounts lost
Medium-Term
o Leasing – obtaining the use of equipment or vehicles and paying a rental or leasing
charge over a fixed period
Avoids raising long-term capital to buy assets, leasing company repairs/upgrades
Periodic payments may total more than one payment, asset returned after use
o Hire purchase – when an asset is sold to a company that agrees to pay fixed repayments
over an agreed time period
The asset belongs to the company, purchase made over time
Periodic payments may total more than one payment
o Medium-term Loan
Bank can supply large sum quickly
Interest rates must be paid back to bank, collateral must be provided
Long-Term
o Share Issue – selling some ownership of the business to investors
Nothing needs to be paid back
Ltds cannot sell shares publicly, expensive to join stock exchange, risk of
takeovers, some loss of ownership,
o Debentures – bonds issued by companies to raise debt finance, often with a fixed rate of
interest
Usually not secured on an asset, convertible debentures can be turned into
shares overtime so the company issuing them will not have to pay it back
Company must pay fixed rate of interest each year up to 25 years, if secured on
an asset and the firm ceases trading the investors may sell the asset
o Long-term Loan – loans that do not have to be repaid for at least one year
Bank can supply a large sum quickly that does not have to be paid back for
awhile
Interest rates must be paid back to bank, collateral must be provided
o Grants – money donated to the business by outside agencies
Do not have to be repaid if conditions are met
Difficult to receive – the business has no choice over who gets the grants
0
0
Other Sources of Finance
Venture Capital – risk capital invested in business start-ups or expanding businesses that have good
profit potential but do not find it easy to gain finance from other sources
Microfinance – providing financial services for poor and low-income customers who do not have
access to banking services, such as loans and overdrafts offered by traditional commercial banks
Crowd Funding – the use of small amounts of capital from a large number of individuals to finance a
new business venture
Factors Influencing Choices of Finance
Use of finance
Size of existing borrowing
Flexibility of firm’s need for finance
Legal structure and desire to retain control
Amount required
0
0
Cost of debt
Time period for which finance is required
Existing assets of the firm
Existing assets of the firm
Costs
Fixed Costs – costs which do not change with output
...
Direct Costs – costs that can be clearly identified with each unit of production and can be allocated
to a cost centre
Indirect Costs – costs that cannot be identified with a unit of production or allocated accurately to a
cost centre
Marginal Costs – the extra cost of producing one more unit of output
Total Costs – all costs required in the production process
TOTAL COSTS = Fixed Costs + Variable Costs
Revenue – total value of sales made by a business in a given time period
TOTAL REVENUE = Price x Quantity
Profit/Loss – how much money the firm has made once costs of production have been taken into
account
PROFIT/LOSS = Total Revenue – Total Cost
0
0
Break Even Analysis
Breaking Even – the level of output where total revenue is equal to total cost
BREAKEVEN POINT OF OUTPUT =
Contribution – how much per unit a company’s variable cost can contribute to paying the fixed costs
...
CONTRIBUTION = Selling Price – Variable Cost
Margin of Safety – the difference in terms of units of production, between the current production
level and the break-even level
Total Revenue
Total Costs
$
Variable Costs
Break Even
Point
Margin of Safety
Fixed Costs
Output
Advantages
Charts are relatively easy to construct and 0
interpret
...
There is no allowance made for inventory levels
management on break-even points, safety
margins and profit/loss levels at different rates
of output
...
Break-even analysis can be used to assist
managers when taking important decisions
...
0
on the break-even chart
...
This is unlikely to always
be the case
...
Not all costs can be conveniently classified into
fixed and variable costs e
...
electricity
0
Accounting
Financial Accounting
Collection of data on daily transactions
Preparation of the published report and
accounts of a business – statement of financial
position, income statement and cash statement
Information is used by external groups
Accounts are usually prepared once or twice a
year
Accountants are bound by the rules and
concepts of the accounting profession
Covers pasts periods of time
Management Accounting
Analysing internal accounts such as budgets
Preparation of information for managers on any
financial aspect of a business, its departments
and products
Information is only available to internal users
Accounting reports and data prepared as and
when required by managers and owners
Not set rules – accountants will produce
information in the form requested
Can cover past time periods, but can also be
concerned with the present or projections into
the future
Accounting Concepts and Conventions
The Double-Entry Principle: Every time a business engages in a transaction e
...
buying materials,
there are two sides to the transaction
...
If no adjustment was made for this accrued expense, then
the profits in the current accounting period will be overstated
...
All accounting data are converted into money – hence
the principle of money measurement
...
Conservatism/Prudence Concept: Accountants are trained to be realistic about the values used in
accounts
...
Profits, on the other hand, should not be recorded until it is certain
that goods or services have been sold at a profit and not a loss
...
So sales are not recorded when an order is taken or when payment is actually
made – but when the goods or services have been provided to the customer
...
g
...
e
...
g
...
There are three sections to an income statement:
1
...
Profit and Loss Section – calculates the overall level of profit made
NET (OPERATING) PROFIT = Gross Profit – Expenses and Overheads
PROFIT FOR YEAR (PROFIT AFTER TAX) = Operating Profit – (Interest Costs + Tax)
3
...
Non-current Assets (Fixed Assets) – assets to be kept and used by the business for more than one
year
Intangible Assets – items of value that do not have a physics presence, such as patents and
trademarks
Current Assets – assets that are likely to be turned into cash before the next balance-sheet date
Trade Receivables (Debtors) – the value of payments to be received from customers who have
bought goods on credit
Liabilities – items owned by the business either long-term (fixed/non-current) or short-term(current)
0
0
Non-Current Liabilities – value of debts of the
business
that will be parable after more than one year
Current Liabilities – debts of the business that will usually have to be paid within one year
Accounts/Trade Payable (Creditors) – value of debts for goods bought on credit payable to suppliers
Shareholders’ Equity – total value of assets – total value of liabilities
Share Capital – the total value of capital raised from shareholders by the issue of shares
0
Example Income Statement
Sales Revenue
1315860
Cost of Sales
48826
0
Example Balance Sheet
Non Current Assets
Premises
889000
Gross Profit
Expenses
Fixtures
Loan Repayments
Mortgage
Other Expenses
Advertising
Insurance
Wages
Total:
Net Profit
Interest
Profit Before Tax
Tax at 20%
Profit After Tax
Dividends
Retained Profit
1267034
Machinery
Vehicle
Current Assets
Stock
Cash
Accounts Receivable
Total Assets
Current Liabilities
Accounts Payable
Overdraft
Non Current Liabilities
Mortgage
Loan
Total Liabilities
Share Equity
Retained Profit
Total Equity and Liabilities
15000
2500
750
2600
2100
1800
42336
67086
1199948
10500
1189448
237890
951558
55000
896558
126000
200000
9500
2260
35798
1262558
49000
7000
300000
4000
360000
6000
896558
1262558
Goodwill – arises when a business is valued at/sold for more than the balance-sheet value of assets
Intellectual Capital/Property – amount by which the market value of a firm exceeds its tangible
assets less liabilities
Information not in Published Accounts
Details of the sales and profitability of each good or service produced by the company and of
each division or department
The research and development plans of the business and proposed new products
The precise future plans for expansion or rationalisation of the business
The performance of each department or division
Evidence of the company’s impact on the environment and the local community
Future budgets or financial plans
Window Dressing – presenting the company accounts in a favourable light – to flatter the business
performance
...
Researchers will be part of this discussion
and will have to keep them ‘on target’ as they may get off track, and they may also present a
bias from them leading or influencing the decision too much
...
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...
The region selected however, must
reflect as closely as possible the social and consumer profiles of the rest of the country
...
They can obtain both qualitative and quantitative data
...
When there is a larger sample, there will be more confidence in results
Random Sampling – every member of the target population has an equal chance of being selected
...
Stratified Sampling – this draws a sample from a specified sub group of segment of the population
and uses random sampling to select an appropriate number from each stratum
...
This is a cheaper method, however is not
random and therefore may not be fully representative
...
Trade Organisations – information concerning products can be received from trade
organisations that produce regular reports on the state of the markets their members
operate in
...
Newspaper reports and specialist publications – could show weekly advertising spend data,
consumer ‘recall of adverts’ results, as well as regular articles on key industries and detailed
country reports
...
The
accuracy and relevance of the source would always have to be checked
...
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...
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...
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