SGO Edexcel Business Theme 2: Managing business activities
Topic outline
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- 2.1.1 Internal finance
- 2.1.2 External finance
- 2.1.3 Liability
- 2.1.4 Planning
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a) Owner’s capital: personal savings
b) Retained profit
c) Sale of assets
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a)Sources of finance:
- family and friends
- banks
- peer-to-peer funding
- business angels
- crowd funding
- other businesses
b)Methods of finance:- loans
- share capital
- venture capital
- overdrafts
- leasing
- trade credit
- grants
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a) Implications of limited and unlimited liability
b) Finance appropriate for limited and unlimited liability businesses-
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a) Relevance of a business plan in obtaining finance
b) Interpretation of a simple cash-flow forecast and calculations based on changes in the cash-flow variables
c) Use and limitations of a cash-flow forecast
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2.2.1 Sales forecasting
2.2.2 Sales, revenue and costs
2.2.3 Break-even
2.2.4 Budgets -
a) Purpose of sales forecastsb) Factors affecting sales forecasts:
- consumer trends
- economic variables
- actions of competitors
c) Difficulties of sales forecasting-
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a) Calculation of sales volume and sales revenue
b) Calculation of fixed and variable costs
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a) Contribution: selling price – variable cost per unitb) Break-even point:d) Margin of safety
- Total fixed costs + total variable costs = total revenue
e) Interpretation of break-even charts f)Limitations of break-even analysis-
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a) Purpose of budgets
b) Types of budget:- historical figures
- zero based
d) Difficulties of budgeting-
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- 2.3.1 Profit
- 2.3.2 Liquidity
- 2.3.3 Business failure
- 2.3.1 Profit
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a) Calculation of:
- gross profit
- operating profit
- profit for the year (net profit)
b) Statement of comprehensive income (profit and loss account):
- measuring profitability: - calculation of gross profit margin, operating profit margin, and profit for the year (net profit) margin
- ways to improve profitability
c) Distinction between profit and cash
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a) Statement of financial position (balance sheet):
- measuring liquidity: - calculating current ratio and acid test ratio
- ways to improve liquidity
b) Working capital and its management: the importance of cash
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a) Internal and external causes of business failure:
- financial factors
- non-financial factors
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2.4.1 Production, productivity and efficiency
2.4.2 Capacity utilisation
2.4.3 Stock control
2.4.4 Quality management -
a) Methods of production:
- job
- batch
- flow
- cell
- output per unit of input per time period:
-link between productivity and competitivenessc) Efficiency:
- production at minimum average cost:
-distinction between labour and capital intensive production - job
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a) Capacity utilisation:
- current output (divided by) maximum possible output (x 100)
b) Implications of under- and over-utilisation of capacity
c) Ways of improving capacity utilisation
- current output (divided by) maximum possible output (x 100)
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a) Interpretation of stock control diagram
b) Buffer stocks
c) Implications of poor stock control
d) Just in time (JIT) management of stock
e) Waste minimisation
f) Competitive advantage from lean production -
a) Quality:
- control
- assurance
- circles
- Total Quality Management (TQM)
b) Continuous improvement (Kaizen)
c) Competitive advantage from quality management
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2.5.1 Economic influences 2.5.2 Legislation 2.5.3 The competitive environment -
a) The effect on businesses of changes in:
- inflation (the rate of inflation, the Consumer Prices Index)
- exchange rates (appreciation, depreciation)
- interest rates
- taxation and government spending
- the business cycle
b) The effect of economic uncertainty on the business environment
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a) The effects on businesses of:
- consumer protection
- employee protection
- environmental protection
- competition policy
- health and safety
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a) Competition and market size
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