2. Using Financial Records

3. Cash flow and Final Accounts Every business needs to record… -Cash Flow -Profit -Net Worth

4. Note: -cash going in -cash going out -and the cash left for a given period, such as a month or a year Cash Flow Records…

5. Cash in… … (otherwise known as Receipts) can be anything from sales, to interest earned on savings, the return on an investment or cash from selling an asset, such as a car

6. Cash out… … Can be anything from accounting and consultancy costs, to general bills, sales tax (GST) and drawings – the owner’s own wage

7. Final Accounts Record… -Profit -Net Worth (the business’s value)

8. Final Accounts are made up of: A Trading, Profit and Loss Account A Balance Sheet

9. Trading, Profit and Loss Accounts Show… -Gross Profits (funds before sales costs) -Net Profits (funds after sales costs)

10. Balance Sheets Are split into two sections: Net Worth – showing the value of assets after debts Financed By – showing how the assets are paid for

11. Ratio Analysis… …Is a method of analysing a company’s performance and health …Gives business owners easily understandable results in percentages or ratios

12. …Are used as Key Performance Indicators (KPIs) to compare business health with previous years or other competitors The Results…

13. Ratio Analysis primarily focuses on… -Profitability -Liquidity -Efficiency

14. Profit Ratios…...Provide percentage margins - the higher the percentage, the more profit/return on investment is being made

15. Liquidity Ratios… …Provide real ratios calculated to analyse changes in the ability to pay debts Two main liquidity ratios are the Current ratio and the Acid Test Ratio

16. Efficiency Ratios… …Analyse how well a business uses its assets - the higher the ratio, the more efficient a company is