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Introduction to finance

• Role of finance for a business:
  1. Capital expenditure
  2. Revenue expenditure

Sources of finance

• The following sources of internal sources of finance:
  1. Personal funds
  2. Retained profit
  3. Sale of assets
• The following external sources of finance:
  1. Share capital
  2. Loan capital
  3. Overdrafts
  4. Trade credit
  5. Crowdfunding
  6. Leasing
  7. Microfinance providers
  8. Business Angels
• Appropriateness of short- or long-term sources of finance for a given situation

Costs and revenues

• The following types of cost, using examples:
  1. Direct
  2. Indirect
  3. Fixed
  4. Variable
• Total revenue and revenue streams, using examples

Contribution & Breakeven analysis

• Learn how to use contribution and draw a breakeven analysis
• Margin of safety

Final accounts

• The purpose of accounts to different stakeholders
• Final accounts:
  1. Profit and loss account
  2. Balance sheet
• Different types of intangible assets
• Depreciation using the following methods (HL only).
1. Straight line method
2. Units of production method
• Depreciation using the following methods (HL only).

Profitability and liquidity ratio analysis

• The following profitability ratios:
  1. Gross profit margin
  2. Profit margin
  3. Return on capital employed (ROCE)
• Possible strategies to improve these ratios
• The following liquidity ratios:
  1. Current ratio
  2. Acid test (quick) ratio
• Possible strategies to improve these ratios

Cash flow

• The difference between profit and cash flow
• Working capital
• Liquidity position
• Cash flow forecasts
• The relationship between investment, profit and cash flow
• Strategies for dealing with cash flow problems

Investment appraisal

• Investment opportunities using payback period, average rate of return (ARR) and NPV (HL only)