IGCSE & A LEVELS GUIDE

Let's now start looking at how governments' policies can influence a country's economy. We will mostly focus on two types of policies: Monetary Policies, that have to do with Interest Rates; Fiscal Policies, related to Tax Rates and Government Spending. Note: Both of these policies are used by governments with the intention of achieving their economic objectives. Monetary Policies is basically 'playing with interest rates' to achieve economic objectives by reducing the money

Chapter 26, Economic Issues Learning Objective: To understand the business cycle and its effects on businesses A country's economy goes through a cycle of prosperity and hardships overtime. Business acitivity is the main lead in this so called Business Cycle: But what really do these stages mean? And what are the impacts on businesses? As you can see, there are changes to many economic indicators during the ups and downs of the Business Cycle: Inflation; Employment; Economic

Chapter 25 - Analysis of Accounts Lesson Objective: To understand how to calculate and interpret liquidity ratios Liquidity: Liquidity is a business access to cash - ability to pay its short-term debts. It is an important measure as it relates to business survival and therefore liquidity ratios should be monitored constantly: Current Ratio Acid-Test Ratio To understand Liquidity Ratios we will be making use of the following information: The Current Ratio shows the ratio betwe

Chapter 25 - Analysis of Accounts Lesson Objective: To understand the various profitability ratios available You should know by know the meaning of the term shareholders' equity (a.k.a. owners' equity). I am sure you are also familiar with the concepts of revenue and profit. With that in mind, which of the companies below would you rather have your money on? Company Y has much higher revenue (60% more) and profit (30% more) numbers. However, their total equity is 6x higher th

Chapter 22 - Statement of Financial Position Learning Objective: To understand the uses and how to analyze Balance Sheets After Cash Flow Forecast and Income Statement it's finally time to dive in to the Balance Sheet, also known as the Statement of Financial Position. Assets: any resources owned by the company and can be divided in two parts: - Current Assets: cash or any resource expected to be converted into cash within the next 12 months (e.g. inventories/stock, trade r

Chapter 21 - Income Statements Lesson Objective: To understand the different uses of an Income Statement The Income Statement is a financial report that records the business' revenue, costs and expenses, and profits. It is usually released once a year for the analysis of internal and external stakeholders: Income Statement vs. Cash Flow Forecast The purpose of the Income Statement is to show how much profit a business made at a period of time; On the other hand, Cash Flow For

Chapter 21 - Income Statements Lesson Objective: To understand the different types of profit Profit = Revenues - Costs Profit is not the same as Cash! - Getting a loan increases cash, not profit; - Getting investment increases cash, not profit; - Capital expenditure decreases cash, not profit (likely to increase); - Selling goods on credit increases profit but does not increase cash immediately. Activity 23.1 Not all profits are the same though - we have three different type

Chapter 22 - Cash Flow Forecasting and Working Capital Class Objective: To understand the difference between cash and profit Cash is important to business. Fact! Businesses need cash to pay wages, suppliers, utilities, etc... Cash Flow Management, therefore, is a key element of business management. It is the process of making sure that there is enough cash within the company for paying its debts. Think about it... Can a profitable business run out of cash? Can an unprofitable

Chapter 21 - Business Finance: Needs and Sources Class Objective: To understand the factors impacting sources of financing available What financing method is the best? Which one should a business pick? There are many factors influencing the choice of financing to a business: 1. The size and legal form of the business: Only PLC can issue shares; Small businesses have a hard time getting loans (and high interest). 2. The amount required: Bank loans have a limit depending on the

Chapter 19 - Business Finance: Needs and Sources Learning Objective: The Most Common External Sources of Finance (19.2) We shall now discuss external sources of finance: Overdraft: A 'type of short-term loan'; It allows the customer/business to keep on paying its bills even when the account reaches zero; It acts as an emergency; The limit is pre-agreed and therefore it has quick access. It carries interest. Trade Credit: The payment terms offered by suppliers to the business

Chapter 21.1 - Business Finance Learning Objective: Sources of Finance (19.1) Businesses need financing... It's obvious. Every business needs financing. Businesses need startup capital: This is the capital needed by an entrepreneur when starting a business. Businesses need finance to purchase so called non-current (a.k.a. fixed) assets: These are long-term assets (>12 months) such as buildings, machines, technology, and vehicles. Such investments are called capital expenditur