• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Financial Planning

Extracts from this document...

Introduction

Financial Planning Businesses need to manage and measure their financial performance and check important indicators of their financial 'health'. It is vital that they know what their revenue and costs are if they want to see how much profit they are making. Businesses regularly measure their profit to monitor their progress. It is essential that businesses measure their profitability to see how much profit they are making and determine whether or not their business is successful. There is an essential distinction between profit and revenue; profit is not the same as revenue. Revenue is the amount of money a business receives from its sales however, the business has to deduct its own costs from the revenue and the sum that is left is actually the profit. If the business has costs which are greater than its turnover, instead of making a profit it will make a loss. Mostly all businesses exist to make a profit.. One of the ways businesses can improve their profits is by increasing their prices if the demand for their product is price inelastic, or even by reducing their prices to increase demand if the demand for their product is price elastic. During the first few months of trading, if I increase the prices of my cakes and charge relatively high prices, this will ...read more.

Middle

Liabilities Liabilities are things that businesses owe. There are two types of liabilities: current liability and long term liability. Current liabilities are short term debt for a business. They include an amount that can be paid off within a year. These liabilities may include overdraft repayments, wages, trade creditors, and expenses such as electricity/gas/water. Long term liabilities are the items that a business intends to keep for longer than a year. These liabilities do not require interest payments during the current year. They could include bank loan or mortgage. Expenses Business expenses are the cost of carrying on a business. Every business incurs expenses. These expenses might include: the rent of premises, utility, advertising costs, insurance, interest on loan, motor expenses and depreciation. These expenses are usually deductable and can reduce your tax liabilities. Cash flow Forecasts Cash flow forecasts are statements that show the amount of money that is predicted to come into and flow out of the business over a period of time. It is therefore useful for a business to make a cash flow forecast because it aids them in making decisions. However, cash flow forecast do have some weaknesses the main one being that they are not always accurate because they are based on assumptions. ...read more.

Conclusion

For example employees would be interested in the amount of profit the business is making, as an indicator of job security and potential pay rises. Shareholders would also want to know the business's operating profit because they would like to get as much dividend as possible. However profit and loss account can be manipulated to paint a better picture of the business which can be misleading. The financial data included is not adjusted for price changes, impact on the business's performance due to a change in the environment e.g. inflation. Profit and loss will be very useful to my business as it will enable me to pay the correct amount of tax. I can also compare my Profit and loss forecast with the actual performance of other companies- preferably a competitor, to see which aspect of my business needs to be considered more seriously. Balance Sheet The profit and loss account only shows part of the picture. It may show an excellent profit but at the same time, the company may have burdened itself with debt. The balance sheet shows the current health of the business as measured in terms of its assets and liabilities. A balance sheet shows how solvent the business is, and how liquid its assets are. It shows whether the business has the ability to meet its short term obligations, as well as paying all current and long term debts. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Case Studies and Analysis section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Case Studies and Analysis essays

  1. The Impact of Migration on the Reduction of Poverty

    as rural poverty, unemployment and under employment determine the emigrational behaviour of the population. They perceive the needs not only in terms of fulfilling the day-to-day needs but also in terms of acquiring assets which prompt them to choose the route of migration to fulfil their objectives.

  2. The main purpose of this research is to know and analyze whether the Olympic ...

    The case study can be considered as one of the best example to this quantitative research method. 3.5 The research design: Case study approach According to (D Vermeulen, 2009) the research design is the process in which the research questions are been transferred in to the testing process.

  1. How Evans Enterprise party and wedding planners could use IT to help manage their ...

    They have immediate impact and can illustrate their points quickly while having the ability to put across a lot of information using one diagram or a series of related diagrams. An example of a graph being used would be to show how sales vary from month to month.

  2. Disneyland and M&S. I am going to investigate customer service in two separate ...

    running of Disneyland Paris as the internal suppliers are the people who attract and transport people into the Disney resort. Travel agents provide Disney's customers with four main ways of gaining access to the resort; these include air travel, car, bus and train (Eurostar).

  1. Business plan. The business that I am going to produce is a personalised logo ...

    The contents usually include the titles or descriptions of the first level headers. - I need to include a table of contents into my plan to assure every section is easily found, and completed progressively.

  2. PEST is a planning tool which is used by a business to evaluate and ...

    PEST analysis can also help a business to be aware of future difficulties in association with their business this means that the business owners can take action to avoid or minimise the effect that the factor has on their business.

  1. Nestle stakeholders and business environment

    They apply: United Nations Global Compact (UNGC), UN Millennium Development Goals (MDGs), International Labour Organization (ILO) conventions, Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises. At the 2011 Corporate Governance Awards ceremony organised by World Finance Magazine, Nestlé received the award for Best Corporate Governance in Switzerland.

  2. Galvor Case. Planning and control system for Galvor as a part of an ...

    MNC may pursuit different strategy for the business units, for different reasons and thus, implies different coordination mechanisms. If the roles of the units are as marketing satellite, local innovator, they would need centralized decision-making, and intensive financial performance control.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work