GCSE BUSINESS STUDIES FINANCE REVISION – UNIT 1 - Presentation

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Slide1

GCSE BUSINESS STUDIES

FINANCE REVISION – UNIT 1Slide2

RAISING FINANCE

STARTER – What are ‘Interest rates’?

Methods of raising finance include:

Bank Loan

Overdraft

Mortgage

Own Savings

Loan from Family or Friends

Sell shares

Government grant

Q1. Can you define / explain each of the above?

Q2. Can you give advantages & disadvantages of each of the above?Slide3

Sources of Finance

3.1 Finance and support

Mandy used to work as a costume designer at her local theatre until she left work 3 years ago to bring up her daughter Natalie, now 4 years old. Mandy now works from her house in Slough where she provides, makes and sells hand made glove puppets. At the moment she sells at local craft fairs and through word of mouth. She now wants to expand her business to include an on line shop and also to provide puppet shows for children’s parties and puppet making workshops for slightly older children's parties.

Question time

Identify 2 reasons why Mandy may need to raise finance. (2 marks)

Explain 1 advantage and 1 disadvantage of taking out a bank loan. (4 marks)

Mandy is considering applying for an additional mortgage on her house to finance the business expansion. Do you think this is a good idea? Justify your answer. (9 marks)

Remember for the 9 mark question you need to weigh up both sides before reaching a conclusion.Slide4

Answer guidance

Remember – 1 point per mark

Relate your answer to the details in the question

Q2 – Explain (4 marks)

1 advantage to Mandy of taking out a bank loan is ………. This is an advantage because …………

Another advantage to Mandy of a bank loan is ………………… This is an advantage because …………….

Q3

(Justify) - 9 marksDefine mortgageGive 2/3 reasons why it is good:

One good thing about a mortgage is ……….. This means …….. This is good because ………..Give 2/3 reasons why it is bad:One bad thing about a mortgage is ……….. This means …….. This is good because ………..Consider 1 /2 alternatives:An alternative source of finance that Mandy could consider is ……………. This may be better than a mortgage because …….Reach a conclusionIn conclusion I think that Mandy should ………… This is because …………..Slide5

What is meant by the following Financial Terms?

Price

Sales

Revenue

Costs

Profit

3.2 Terms and CalculationsSlide6

Financial Calculations

Terry sells luxury bathrobes to boutique retailers across the UK.

Each robe sells to retailers at

£

90

and costs

£40 in towelling and other raw materials used to make the product.He sells 800 robes per monthHis monthly costs are:Distribution £15

00Wages £4500Marketing £1250Equipment £20003.2 Terms and Calculations

Calculate Terry’s profit or loss. You must show all your workings.Slide7

Cash flow statement

Jan (£)

Feb (£)

Mar (£)

Jun (£)

Cash In

(Receipts)

40004500

55006500Cash Out(Payments)13000225020002500Opening Balance0

-9000

-6750

-3250

Closing Balance

- 9000

-6750

-3250

750

3.3 Cash Flow

A cash flow statement for the first 4 months of Geoffrey’s farm shop.

Can you explain the following figures?

Why is his closing balance negative in January?

Why might having a negative closing balance be a problem?

Recap 3.1

What is an overdraft?

How might an overdraft help Geoffrey?Slide8

The importance of cash flow statements

Cash Flow Forecasts

Businesses normally produce a forecast of their expected cash flow before the start of the year

This allows them to spot any potential cash shortfalls in advance

They can then look to avoid this

They can then make plans for this i.e. a pre arranged overdraft

Can monitor actual cash flow against predicted

3.3 Cash Flow

An unusual solution to cash flow problems!