← Lessons 05-Financial Management Techniques
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1. Introduction 2. Definitions of Key Financial Terms 3. Sources of Funds 4. Uses of Funds 5. Trading and Profit & Loss Accounts 6. Balance Sheet 7. Legal Requirements 8. Balance Sheet Terms and Ratios 9. Budgeting 10. Cash Flow 11. Cash Budgeting 12. Stock Control 13. Conclusion 14. Final Memory Checklist

14. Final Memory Checklist

  • Capital = money invested in the business.
  • Assets = what the business owns/uses; liabilities = what it owes.
  • Fixed assets = normally held over 1 year; current assets = day-to-day resources.
  • Long-term funds = at least 1 year; short-term funds = less than 1 year.
  • Long-term funds: shares, revenue reserves, debentures and long-term loans.
  • Short-term funds: creditors, overdrafts, short-term loans and taxation due.
  • Turnover − Direct Costs = Gross Profit.
  • Gross Profit − Indirect Costs = Net Profit Before Tax.
  • Balance sheet = financial snapshot of assets, liabilities and capital at a given date.
  • Working Capital = Current Assets − Current Liabilities.
  • Current Ratio = Current Assets ÷ Current Liabilities.
  • Acid Test = (Current Assets − Stock) ÷ Current Liabilities.
  • Capital Employed = Total Assets − Current Liabilities.
  • ROCE = Net Profit Before Tax ÷ Capital Employed × 100.
  • Cash flow = actual cash received and paid; turnover is not the same as cash received.
  • Cash budgeting forecasts future receipts and payments and helps identify shortages early.
  • Debt factoring can improve immediate cash flow but involves charges.
  • Stock control = availability at acceptable time and cost.
  • Lead time = time between placing an order and receiving goods ready for use.
  • Reconcile book stock with physical stock and investigate discrepancies.
  • Accounts are management tools, not just legal documents.