1.1 identify the sources of finance available to a business
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Learning Outcomes Content Assessment Criteria for Pass
LO1 Understand the sources of finance available to a business
Range of sources: sources for different businesses; long term such as share capital; retained earnings; loans; thirdparty investment; short/medium term such as hire purchase and leasing; working capital stock control; cash management; debtor factoring
Implications of choices: legal, financial and dilution of control implications; bankruptcy Choosing a source: advantages and disadvantages of different sources; suitability for purpose eg matching of term of finance to term of project
1.1 identify the sources of finance available to a business
1.2 assess the implications of the different sources
1.3 evaluate appropriate sources of finance for a business project
LO2 Understand the implications of finance as a resource within a business
Finance costs: tangible costs eg interest, dividends; opportunity costs eg loss of alternative projects when using retained earnings; tax effects
Financial planning: the need to identify shortages and surpluses eg cash budgeting; implications of failure to finance adequately; overtrading
Decision making: information needs of different decision makers
Accounting for finance: how different types of finance and their costs appear in the financial statements of a business; the interaction of assets and liabilities on the balance sheet and on international equivalents under the International Accounting Standards (IAS)
2.1 analyse the costs of different sources of finance
2.2 explain the importance of financial planning
2.3 assess the information needs of different decision makers
2.4 explain the impact of finance on the financial statements
LO3 Be able to make financial decisions based on financial information
Budgeting decisions: analysis and monitoring of cash and other budgets
Costing and pricing decisions: calculation of unit costs, use within pricing decisions; sensitivity analysis
Investment appraisal: payback period; accounting rate of return; discounted cash flow techniques ie net present value; internal rate of return
Nature of long-term decisions: nature of investment importance of true value of money; cash flow; assumptions
in capital investment decisions; advantages and disadvantages of each method
3.1 analyse budgets and make appropriate decisions
3.2 explain the calculation of unit costs and make pricing decisions using relevant information
3.3 assess the viability of a project using investment appraisal techniques
LO4 Be able to evaluate the financial performance of a business
Terminology: introduction to debit, credit, books of prime entry, accounts and ledgers, trial balance, final accounts and international equivalents under the International Accounting Standards (IAS).
Financial statements: basic form, structure and purpose of main financial statements ie balance sheet, profit and loss account, cash flow statement, notes, preparation not required; changes to reporting requirements under the International Accounting Standards (IAS) eg statement of comprehensive income, statement of financial position; distinctions between different types of business ie limited company, partnership, sole trader.
Interpretation: use of key accounting ratios for profitability, liquidity, efficiency and investment; comparison both external ie other companies, industry standards and internal ie previous periods, budgets
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