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GCSE: Accounting & Finance

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How to calculate 'break even'

  1. 1 There are three ways this can be done. All will give the same answer which is the number of products the business must make or sell to ‘break even’. This means they receive as much revenue as their costs.
  2. 2 A break even table will list the fixed cost, variable cost, total cost (fixed plus variable cost), revenue and profit or loss for each level of output. As profit or loss is the revenue minus the total cost this can be calculated relatively easily, especially if you use a spreadsheet program..
  3. 3 A break even graph plots the total cost and revenue for all the levels of output. Where the total cost and revenue intersect is the break even point. This can be easily produced from the table using the chart wizard.
  4. 4 The break even formula gives you the break even output. The formula is fixed cost divided by the price of one unit minus the variable cost.
  5. 5 The margin of safety is the number of items being produced, over and above the break even point.

What is cash flow?

  1. 1 Cash flow looks at the cash flowing through a business. It is not the same as the profit being made as businesses may be receiving goods on credit or giving credit to customers. This means that although a business may be profitable, it may still run out of cash. This could cause the business to go bankrupt.
  2. 2 A cash flow forecast predicts the flow of cash going through the business. A business may use it to see if there are any months when it will run out of cash.
  3. 3 Knowing that it may run out of cash in any month means that a business can plan for this by possibly arranging a bank overdraft.
  4. 4 A bank overdraft is an agreement arranged with a bank whereby if the business runs out of cash, the bank will lend it money to keep it trading. This overdraft will normally be at a high rate of interest but is better for a business than running out of cash.
  5. 5 A business may also cover a period of negative cash flow by deferring payment to suppliers or getting payment early from customers.

What could be a source of finance?

  1. 1 Many students go wrong when discussing sources of finance by not relating them to the size of the business or the reason they need it. A new business starting up has different needs to an existing business looking to expand.
  2. 2 Sources of finance available to sole traders and partnerships include the owner’s funds, borrowing from friends and relatives, bank borrowing or funds from venture capitalists that specialise in lending to new businesses.
  3. 3 A problem for sole traders and partnerships is unlimited liability. This means that the owner is responsible for all the debts of the business, not just the amount they have invested.
  4. 4 Private limited companies and public limited companies have limited liability. This means that investors in the businesses can only lose the amount they have invested. This makes it much easier for them to raise finance as people are more likely to lend to them knowing the maximum amount they can lose.
  5. 5 A benefit of selling shares compared with borrowing from the bank is that the money does not need to be repaid. Share holders will expect a share of the profits. With a loan, the amount borrowed has to be repaid with interest.

  • Marked by Teachers essays 5
  • Peer Reviewed essays 7
  1. Marked by a teacher

    Cash flow. A cash flow forecast is a document that predicts cash requirements in the future. It helps a business save money for things it may need in the future

    4 star(s)

    A business can improve their financial situation by borrowing money from a bank, cutting costs or increasing sales. Businesses use cash flow forecasting to anticipate months where they may have a shortfall and get ready for them by taking action before they happen. It may help the business if they identify areas where the business was weak or strong and change strategy to deal with any problems and maximise potential. The five parts of a cash flow forecast are: Receipts, payments, excess of receipts over payments, opening bank balance and closing bank balance. Cash Inflow: This section shows how much the business (in this case, a garden centre)

    • Word count: 758
  2. Marked by a teacher

    Financial analysis for a new business - Delight Lollies

    4 star(s)

    Examples of start up costs are premises, machinery, equipment, fixtures and fittings and market research to start up the business. Running Costs- Running costs are paid everyday to run the business, examples of these are wages, bills, raw materials and insurance. Fixed Variable Rent �40 Each Box purchased each day: �5.50 License for Trade �20 Block of Ice �50 Delivery Charge (weekly) �14 Total �124 Total : �27.50 Overall Total: �151.50 Fixed Variable Rent �40 Each Box purchase �55 License of Trade �20 Block of Ice �50 Delivery Charge �14 Overall Total: �399 Task Two The following section I will be explaining the importance of costs, revenues and profits.

    • Word count: 784
  3. Marked by a teacher

    effective cashflow management

    4 star(s)

    (Source: www.brunswickis.co.uk) Budgetary control is a process of monitoring and analysing financial control within organisation. Budget "A budget is a plan, which is set out in numbers. It sets out figures that an organisation or company hopes to achieve in the future." (Source: THE TIMES 100) Budget is a financial plan, sets out financial targets and a plan expressed in money over a given period. Organisations prepare budgets for sales, production, costs, assets, liabilities and cash flow and prepare in advance then compared with actual performance. Managers are responsible for the controllable costs within their budget and they are require to take appropriate action if there are any mistakes.

    • Word count: 1263
  4. Peer reviewed

    Stock Market Crash

    5 star(s)

    Many of the investors had to borrow money to buy stocks but they only had to have 10% equity and 90% margin to buy securities. Speculations on stocks stimulated further price rises and created an economic bubble. The P/E ratios in 1929 were far beyond historical norms. The high level of speculations increased anxiety of the investors, so when on October, 24 prices started falling, many investors decided to sell their shares. The leading Wall Street bankers tried to stabilize the situation on Friday, but could not find a proper solution.

    • Word count: 1225
  5. Peer reviewed

    Business Costs

    5 star(s)

    If all the products together make enough contribution then the business will make a profit. Fixed & Variable Fixed costs are costs which do not vary. They are mostly indirect costs - Management salaries, telephone bills and office rent.

    • Word count: 348
  6. Peer reviewed

    TO: The PQR Company (Current Shareholders)

    4 star(s)

    Calculation based on the difference between 4,010 and 3,600, over 3,600. At the same time cost of sales fell. We can straight away tell the company's gross profit has also increased. Taking these into account, we are able to calculate the Return on capital employed (ROCE), which for 2002 is 12.1, 2003 figures are better but 2004 are even better (13.0), showing the company is making use of its assets. An increase of 0.9 % in ROCE can be significant, especially in comparison to the amount of money the company may have borrowed. Therefore the company needs to ask it self is the ROCE sufficient enough, if it is in need of extra funds by means of debt.

    • Word count: 1344
  7. Peer reviewed

    The collapse of energy giant Enron.

    4 star(s)

    But the company's success, were based on artificial inflated profits, dubious accounting practices, and some say fraud. The firm's success turned out to have involved an elaborate scam. Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts. The profits eventually did not show up in the company's accounts. As the depth of deception unfolded investors and creditors retreated, forcing the firm into bankruptcy in December For Enron employees and retirees themselves, the consequences were crystal clear from the day the company crumbled. To put it simple, they lost their savings.

    • Word count: 830
  8. Peer reviewed

    Management of costs.

    4 star(s)

    This makes them hard to deal with, notably in break-even analysis. Examples of semi-variables include maintenance expenditure and telephone bills. In the latter case, it is clear that although a doubling of customer demand would not necessarily double a firm's telephone calls or bills, it is reasonable to expect that they would increase. Therefore the telephone is neither a fixed nor a variable cost. It is important to classify costs because it helps with spending, it helps with budgets and help in producing break-even charts.

    • Word count: 1342

Conclusion analysis

Good conclusions usually refer back to the question or title and address it directly - for example by using key words from the title.
How well do you think these conclusions address the title or question? Answering these questions should help you find out.

  1. Do they use key words from the title or question?
  2. Do they answer the question directly?
  3. Can you work out the question or title just by reading the conclusion?
  • Compare the two companies Tesco's and McDonalds

    "McDonalds first opened in 1974. More than 2.5 million people in this country trust McDonalds to give them food of a high standard, quick service and value for money. In my opinion McDonalds create a high standard of customer satisfaction. My reason for thinking is this because customer convenience and research is driving force behind new restaurant locations - which had led to new McDonalds in sites as varied as cross- channel ferries, a bowling alley and London's former county hall. Currently there are more than 1000 McDonald's restaurants throughout the UK. McDonald's business activity External Influences and the Stakeholder Model: McDonald's - Activity Image: Business has not been going as well for McDonald's in recent years because it is struggling to keep up with the demands being made to it. There are a number of Activities("

  • Assess the contribution of set and lighting to

    "In conclusion, the contribution of set and lighting in the play 'The Smallest Person' on their own was basic and failed to create an atmosphere that could affect the audience. However together, there was quite different effect as the two conventions worked together to find an equilibrium of their imbalances and achieve a good affect upon the audience. Khushwant Bhakar 12Jr"

  • Auditing is becoming an increasingly expensive part of the management of health care. Discuss the role it plays in the financial management of a hospital, and comment on the value this adds.

    "13. Conclusions The impact of US scandals have made auditing a high profile subject. The primary purpose of audit within the public sector remains to demonstrate the appropriate use of resources. It is important that the perception of the public and Parliament, through the PAC, are satisfied. In specific terms the future of audit is uncertain, however, given the facts identified in this report the demand for and the costs of auditing public sector organisations are likely to become more difficult to control. A key element in delivering effective audit will be the supply of a skilled audit workforce. There may be scope and a need for recruiting people from different professional backgrounds in order to support audit processes."

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