using financial records cash flow and final accounts every business needs to record… -cash flow...
TRANSCRIPT
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Using Financial Records
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Cash flow and Final Accounts
Every business needs to record…
- Cash Flow
- Profit
- Net Worth
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Note:-cash going in -cash going out -and the cash left
for a given period, such as a month or a year
Cash Flow Records…
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Cash in…
… (otherwise known as Receipts) can be anything from sales, to interest earned on savings, the return on an investment or cash from selling an asset, such as a car
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Cash out…
… Can be anything from accounting and consultancy costs, to general bills, sales tax (GST) and drawings – the owner’s own wage
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Final Accounts
Record…
-Profit
-Net Worth (the business’s value)
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Final Accounts are made up of:
• A Trading, Profit and Loss Account
• A Balance Sheet
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Trading, Profit and Loss Accounts
Show…
-Gross Profits (funds before sales costs)
-Net Profits (funds after sales costs)
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Balance Sheets
Are split into two sections:
Net Worth – showing the value of assets after debts
Financed By – showing how the assets are paid for
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Ratio Analysis…
…Is a method of analysing acompany’s performance andhealth
…Gives business owners easilyunderstandable results inpercentages or ratios
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…Are used as Key Performance Indicators (KPIs) to compare business health with previous years or other competitors
The Results…
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Ratio Analysis primarily focuses on…
- Profitability
- Liquidity
- Efficiency
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Profit Ratios…
...Provide percentage margins - the higher the percentage, the more profit/return on investment is being made
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Liquidity Ratios…
…Provide real ratios calculated to analyse changes in the ability to pay debts
Two main liquidity ratios are the Current ratio and the Acid Test Ratio
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Efficiency Ratios…
…Analyse how well a business uses its assets - the higher the ratio, the more efficient a company is