Higher BM - Finance Revision

Compare a bank loan and a government grant (2)

• Has to be repaid overtime whereas doesn't have the be repaid

• Renting an asset whereas paying in monthly instalments

• Both involve borrowing an asset for a length of time

• You can get it time and time again whereas often only one-off

Compare a leasing and hire purchase (2)

• Has to be repaid overtime whereas doesn't have the be repaid

• Renting an asset whereas paying in monthly instalments

• Both involve borrowing an asset for a length of time

• You can get it time and time again whereas often only one-off

Explain the benefits of preparing a cash budget (3)

• It shows the gross profit and profit for the year of the business which allows them to calculate dividend payments

• Managers can compare planned budgets with actual performance which helps to monitor performance

• It highlights periods where a deficit is expected which allows for finance to be put in place to prevent it

• It highlights periods of excess cash/surplus which allows the business to plan for investment

Describe the advantages to a finance department of using accounting software (2)

• Calculations are carried out by the software by entering a formula so errors are minimised

• Can simulate products in a 3D environment which reduces waste

• Most software allow for information to be password protected to restrict access

• Can improve efficiency of production which helps to reduce costs

Describe the ratio which Santander UK plc may calculate from the Income Statements shown in Exhibit 4 (1)

• Current Ratio

  Current Assets\ Current Liabilities

• Acid Test Ratio

  (Current Assets - Closing Inventory)\ Current Liabilities

• Profit for the Year Percentage

  Profit for the Year\ Sales Revenue x 100

• Gross Profit Percentage

  Gross Profit\ Sales Revenue x 100

Using Exhibit 3, describe the ratio which NHS Health Scotland can calculate from its Statement of Financial Position (1)

• Current Ratio

  Current Assets\ Current Liabilities

• Acid Test Ratio

  (Current Assets - Closing Inventory)\ Current Liabilities

• Profit for the Year Percentage

  Profit for the Year\ Sales Revenue x 100

• Gross Profit Percentage

  Gross Profit\ Sales Revenue x 100

Describe the possible reasons for the increase in Santander UK plc’s Profit for the Year figure from 2020 to 2021 (2)

• Increase in sales revenue

• Decreased gross profit

• Decrease in expenses

• Decrease in other income

Describe the sources of finance that a public limited company (plc) may use to expand (3)

• A bank loan is a sum of money borrowed from the bank, paid back with interest

• Selling shares is allowing new/existing shareholders to invest in the organisation and in return are paid a dividend

• Grants are sums of money that are applied for that do not need paid back but the business must meet certain criteria

• Personal savings is a sum of money saved up by the owner over time

Describe 4 pieces of financial information contained in an Income Statement (3)

• Sales Revenue is the amount of money generated through the sale of goods

• Current assets are items that are owned by the business for less than a year e.g. stock

• Gross Profit is the sales revenue minus the cost of sales (the amount of money made from buying and selling)

• Profit for the Year is the overall profit (or loss) that the business has made over the year (gross profit - expenses)

Describe how the Statement of Financial Position may be used by the following NHS Health Scotland’s stakeholders (3)

• Scottish Government

• Suppliers

• Managers

• Scottish Government
  - to monitor the risk of debt which could increase the Scottish Government's borrowing

• Suppliers
  - will want to see if they can pay for goods and services

• Managers

  • - to monitor and measure performance

• Scottish Government

  • - will want to know how much profit the NHS is making