Finance Revision

IGCSE
Mohammed Fazil Hussain

Mohammed Fazil Hussain: Business Notes

Business Plan
This is the primary task to do when establishing a business. It contains many specific points that outline your businesss functions and objectives: 1. What type of business it is (i.e. what is its function) 2. What your purpose of starting the business is (i.e. profit/providing a service) 3. Your goals/achievements that you expect to achieve within a manageable time. 4. Mention any uncertainties concerning the businesss survival, growth etc. 5. Resources that are required to set your business up (i.e. buildings/offices, loans) 6. Identify your aimed market/consumer and how you aim to attract customers to a new brand. 7. Identify your main competitors in the market and your possible techniques of surpassing their success. 8. Mention any other business that can aid you in your function such as a transportation business to transport your products/ a supplier to supply your products. 9. Make a basic note of how much your starting capital is to set sights on how to deal with that and establish the business. Repayment should also be a priority if a loan is taken.

Variance Analysis
This is when the business makes an analysis of the outcomes that have turned out to be completely different than expected. It is the comparison of the actual result against the expected results. If the expectations were lower than achieved, the business has a favourable variance, if vice versa than it is an adverse variance.

Choice in sources of Finance

There are many factors that are applied before the business can come to a certain decision of choosing the source. Such factors are as follows: 1. How long the business needs the finance for? 2. How much (amount) is required? 3. What is the status/reputation and size of the business? (Whether the business is capable of repaying the loan back or not) 4. What is the capital balance of the business? (Is it highly geared?)

Mohammed Fazil Hussain: Business Notes

Documents Banks will require

Balance Sheet: This shows the amount/value of how much you own and the amount/value of how much you owe. Profit and Loss Account: This shows to the bank manager whether the business is making a profit or loss to pay them back. Cash Flow Forecast: Predicting where the in flowed Cash will flow out. Reasons for Finance 1. Starting Up a Business: new equipment/ offices and assets. 2. Run the business: Paying employees wages/ rent for location/ suppliers 3. Expanding the business: i.e. opening a new branch, expanding business activity. What is Cash Flow? Cash Flow has two different variants, inflow and outflow. Cash inflow is the source that causes the business to receive money/profit/sales. Cash outflow are the people that the business owes money to i.e. suppliers, shareholders, employees. It is money that comes and goes through a business through a period of time. To predict the cashs movement, the business has to create a cash flow forecast