Finance and accounts

In the class of yesterday, we began with visualized of had videos where that to fill up the spaces that lacked of the text that says a personage.

Next, we made an exercise on in marketing kids divided in 3 parts. First he was pre - listening where have that to respond to questions, second listening where a man explained what kids was marketing and finally an exercise of post - listening.

In order to finalize the class, the teacher explained the subject to us of the class that now I am going to happen to comment.

FINANCE and ACCOUNTS

This divided in five parts

- Key Terms
- Purpose of Accounts
- Break Even
- Balance Sheet - Snapshot
- Profit and Loss Account - Flow

Key Terms
Is divides in:

- Costs
- Revenue
- Profit/Loss

Costs

- Fixed – are not influenced by the amount produced but can change in the long run e.g., insurance costs, administration, rent, some types of labour costs (salaries), some types of energy costs, equipment and machinery, buildings, advertising and promotion costs.

- Variable – vary directly with the amount produced, e.g., raw material costs, some direct labour costs, some direct energy costs

Total Costs (TC) = Fixed Costs (FC) + Variable Costs (VC)

Average Costs = TC/Output (Q)

–AC (unit costs) show the amount it costs to produce one unit of output on average
lMarginal Costs (MC) – the cost of producing one extra or one fewer units of production
–MC = TCn – TCn-1


Revenue

-Total Revenue – also known as turnover, sales revenue or ‘sales’ = Price x Quantity Sold
-TR = P x Q
-Price – may be a variety of different prices for different products in the portfolio
-Quantity – could be global sales

Profit

Profit = TR – TC
- Normal Profit – the minimum amount required to keep a business in a particular line of production.
- Abnormal/Supernormal Profit – the amount over and above the amount needed to keep a business in its current line of production.

Break Even

Occurs where Total Costs = Total Revenue
–Start-up costs – fixed costs
–Running costs – variable costs
–Revenue stream depends on price charged
–‘Low’ price – need to sell more to break-even
–‘High’ price – lower level of sales required before breaking even


Purpose of Accounts
Is divided in:
- Provide Information
- Monitor Activities
- Transparency
- Reduce chance of fraud

Provide information for stakeholders – customers, shareholders, suppliers, etc.
Provides the opportunity for the business to monitor its own activities
Provides transparency to enable the firm to attract investment
Reduces the chance for fraud – not 100% successful!!


Profit and Loss Account - Flow
Is divided in:
- Gross profit
- Net (operating profit)
- Profit after tax
- Dividend
- Retained profit

Shows the flow of sales and costs over a period
Shows the level of profit or loss made
Shows what has been done with the profit or loss

Dividend – the share of the profit returned to shareholders
Retained Profit – the amount kept back for future investment, etc.


Balance Sheet - Snapshot

A snapshot of the firm’s position at a point in time
Shows what a company owns (assets) and what it owes (liabilities)
Balance Sheet shows what assets a company has (use of funds) and where the money came from to acquire those assets (source of funds)

Current Assets: assets that are used up during production and which are likely to yield cash in the coming year – for example, stock will be sold and debtors owing the business money will pay up!

Subtracted from the assets are the money the company owes to creditors – suppliers for example.

A guide to the structure of the assets of a company
Gives a guide as to the degree of working capital – the amount the company has to be able to pay its everyday debts (current assets – current liabilities)
Shows the total value of a firm at that moment in time.