Financial information and decisions

Topics

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Sample objectives

What this unit covers

• Business finance: needs and sources: Understand why businesses require finance, including reasons such as initial funding, expansion capital, and extra working capital. Recognize the distinction between short-term and long-term financial needs.
• Business finance: needs and sources: Identify the primary sources of finance available to businesses, including both internal and external options, as well as short-term and long-term sources. Examples include overdrafts for short-term needs and debt or equity for long-term needs. Discuss the significance of alternative funding methods like micro-finance and crowd-funding. Evaluate the key factors influencing financial decisions, such as the business's size and legal structure, the amount needed, duration, and existing debts. Recommend and justify suitable financing sources based on specific scenarios.
• Cash-flow forecasting and working capital: Understand the significance of cash and cash-flow forecasting for a business, including the reasons cash is vital, the construction and interpretation of a basic cash-flow forecast, and strategies to address short-term cash-flow issues such as using an overdraft, delaying payments to suppliers, or encouraging quicker payments from customers.
• Cash-flow forecasting and working capital: Recognize the concept of working capital and its significance to a business's operations.
• Income statements: Understand what profit is and its significance, including how profit is generated and its importance to private sector firms, such as serving as a reward for taking risks and providing a source of funding. Also, recognize the distinction between profit and cash.
• Income statements: Familiarize yourself with the key components of an income statement, including revenue, cost of sales, gross profit, and retained profit. Apply simple income statements in decision-making processes that involve profit calculations, noting that the construction of income statements will not be evaluated.
• Statement of financial position: Identify the key components of a statement of financial position, including the main categories of assets and liabilities, with relevant examples.
• Statement of financial position: Analyze a basic statement of financial position to draw conclusions about how a business funds its operations and the assets it possesses, such as using inventory sales for financing (note that constructing these statements is not part of the assessment).
• Analysis of accounts: Understand the concept of profitability and its significance for businesses.
• Analysis of accounts: Recognize the concept of liquidity and its relevance to business operations.