BTEC First Business Unit 2 - Finance for Business
I was going to retire these pages in July 2021, but having looked at Google Analytics it seems people still use them. There's probably a business lesson there about knowing your client base or something...
Profits and Income Statements
Learning Aim C1: Understand how businesses measure success
Businesses need to know whether they are doing OK. Are they making enough money? Are their costs under control? Do they have the right assets to move forward? Knowing how to measure success effectively is important.
You need to know about:
- Cost of sales
- Gross profit
- Net profit
- Income statements
- Balance sheets
Making a profit
Make sure you know the key definitions. It gets a little tricky here - lots of similar terms meaning slightly different things. Precision is everything.
Cost of Sales, Gross Profit and Net profit - slides, including definitions and formulae
Note that you need to know these formulae in an exam. They will not be provided for you.
Using financial statements
Financial statements are essential documents for businesses to keep. They need to be up to date and easy to use.
A range of people involved in a business might want to check financial documentation. These might include:
- Managers - is the business on track to do well?
- Shareholders - is the money they invested safe?
- Suppliers - does the business have enough money to pay what it owes?
- Government - how much tax is owed? Is the business meeting all the financial regulations placed on it?
Income statements - slides on how they work and what makes them up. Sometimes called a trading account
Balance sheets - now the developed version
Balance sheet - with notes to explain each element
Example balance sheet - which can be filled in for practise
The BBC Bitesize site has some notes on financial records and why they're important, including most of the key formulae and charts.