Edexcel Business Studies, Unit 3+ (GCSE)

Unit 3

Improving Cash flow

CashFlow: the movement of money into and out of a business

TradeCredit: When a supplier gives a customer a period of time to pay off an invoice

De-stocking: reducing the levels of stock in a business

Changing Cash inflows:

• Increasing sales revenue

• De-stocking

• Improved cash flow from customers

• Loans

• Issuing new shares

• Selling off physical assets

Changing Cash Outflows:

• Reducing the orders of stocks

• Delaying paying invoices

• Leasing rather than buying assets

Improving profit

Profit: occurs when revenue is greater than costs over a period of time.

Revenue: the amount of money received from selling goods or services over a period of time.

Profit = Revenue – Costs

Ways of cutting costs:

• Materials costs

• Labour/workers

• Investment

• Marketing

Revenue = number sold X average price

Ways of increasing revenue:

• Improving marketing

• Better products

Break-even charts

Break-even point: The level of output where total revenues are equal to total costs.

Variable costs: Costs which change directly with the number of products made by a business

Margin of safety: The amount of output between the actual level of output and the break-even level of output.

Contribution = price per item – variable cost of the item

Break-even level of output = fixed cost / contribution

Break-even analysis can help to:

• Achieving future targets

• Launching a product

• Starting a new business

• Business Plans

Financing growth

Share capital: The monetary value of a business that belongs to the businesses owners.

Share: A part ownership in a business

Overdraft: Borrowing money from a bank by drawing more money than is actually in a current account.

Bonds: A long-term loan which typically interest is paid at regular intervals, the loan is repaid at the end of its lifetime; Bonds are traded on stock markets.

Internal sources of finance:

• Retained profit

• Asset sales

External sources of finance:

• Share capital

• Debt –Overdraft, Bonds, Trade Credit

Advantages and Disadvantages:

• Cost

• Risk

• Availability of finance

Unit 4

Organisational Structure

Subordinate: workers in a hierarchy who work under the control of a more senior worker.

Chain of command: The path down where orders are passed; in a company,…