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Business Accounts PowerPoint Presentation
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Business Accounts

Business Accounts

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Business Accounts

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  1. Makesomewonderful notes Business Accounts are the records of what a business sells, buys and owns. and by others who have (or want to have) links with the business They are used by the owners of the business click Nearly Everyone is interested to know if the business will continue So

  2. Solvencyisveryimportant... in factCRUCIAL. Anothertermrelatingto the amount of Cash is LIQUIDITY http://www.bbc.co.uk/schools/gcsebitesize/business/finance/solvencyrev1.shtml SuccessorFailure HappinessorMisery dependonit All businesses need to assess how they are performing and solvency is indication of this. There are a number of simple calculations used to assess liquidity & solvency. click TheyALL relate to the amount of CASH in / or available quickly to a business Try to remember the "Cash Flow" demonstration for next year ???

  3. STABLEis OK click

  4. INCREASINGisBetter click

  5. DECREASINGisBad click

  6. To try and avoid disaster we make a "Cash Flow" plan (or Forecast) Note "Sales" & "Cash" are different because they can occur at different times click Click to display a better example from an IGCSE Exam

  7. Note: a "Cash Flow" Forecast is similar to a "Budget" but the emphasis is on when "Cash" actually enters or leaves a business Remember: a "Budget" is a plan for the future Income (from sales or loans) compared to the cost of producing the sales BOTH are usually prepared in the form of a table (or Chart) showing the amounts coming in and going out each month. For Ease they are usually prepared annually in advance click

  8. Typicalexamquestion You may be given a case study in the exam asking you about, or what is working capital. Here is a typical example Question: Go-Faster Sports is a high street retailer. Look at its balance sheet below and calculate its working capital click

  9. Current ratio Lenders need to know that Go Faster will be able to repay any credit they are given in the short term. The company provides information on its ability to meet its short-term debts by publishing its current ratio. This assesses how many times it could afford to pay its current liabilities out of its current assets. Here is the equation you should learn: current ratio= currentassets/ currentliabilities Q. Now look at Go Faster Sports balance sheet and calculate its current ratio using this formula. click You will see that it is: £30,000 / £5,000 = 6 / 1 = 6:1 This ratio will show us that it could afford to pay its liabilities six times from its current assets.

  10. Acidtest orliquidassets ratio Another measure of a company's liquidity is the acid test/liquid assets ratio. This deducts the value of currently held stock to find the company's ability to meet its liabilities immediately. Stock is the least liquid current asset so it is deducted to give a more realistic view of the company's liquidity. Learnthisequation. You may be asked to calculate the acid test ratio in an exam Acidtest orliquidassets= currentassets - closing stock / currentliabilities Question Now look at Go Faster Sport's balance sheet again and calculate the acid test / liquid assets ratio. click £30,000 - £15,000 / £5,000 =£15,000 / £5,000 =3 / 1 = 3:1 This will show us that Go Faster can afford to pay their short-term debts three times over immediately without selling any stock.

  11. SomeLinks toCompanyBackgroundinformation Business Sectors in UK http://www.iii.co.uk/markets/?type=sectors RetailersUK http://www.iii.co.uk/investment/detail?code=cotn%3ANMX5370.L&display=sector&it=le&showresultsas=list&compare=change.today&orderby=alpha M & S (a very large retail business selling clothes. Food etc. http://www.iii.co.uk/investment/detail?code=cotn:MKS.L&it=le Banks http://www.iii.co.uk/investment/detail?code=cotn%3ANMX8350.L&display=sector&it=le&showresultsas=list&compare=change.today&orderby=alpha Something fishy about marketing John Cleesefish - Google Video.htm john cleese fish - Google Video.htm Now try a Test Bite