Topic B.1
Understand the planning tools businesses use to predict when they will start making a profit
Understand the planning tools businesses use to predict when they will start making a profit
Learners should:
§ Define
breakeven when a business has made enough money through product sales to cover
the cost of making the product (no profit and no loss)
§ Be able to
interpret from a break-even chart:
1. Break-even point
2. Profit
3. Loss
4. Variable costs
5. Fixed costs
6. Total revenue
7. Total costs
8. Margin of safety
§ Calculate
the breakeven (formula will be given in the
assessment)
Breakeven = __ Fixed Costs______________
Selling
price per unit - variable costs per unit
§ Analyse and
explain the value and importance of breakeven analysis to businesses when
planning for success
§ Analyse and
explain the associated risks to businesses of not completing a breakeven analysis
§ Present
given information graphically on a break-even chart
§ Analyse the
effect on the break-even point if sales or (fixed and
variable) costs change, and explain the impact of these changes on the
business
Topic B.2 Understand the tools businesses use to plan for success
Budgeting - learners should understand:
§ The purpose
of budgeting in setting expenditure and revenue budgets
§ The
difference between budgeting and budgetary control (checking
performance against plan)
Cash flow forecasting - learners should:
§ Know the
purpose of a cash flow forecast to identify the money that should becoming into
a business (inflows) and the money going out of
the business (outflows) over a period of time
§ Be able to
identify inflows and outflows
§ Explain the
purpose of a cash flow forecast, including that it identifies the flow of cash
through a business over a period of time
§ Understand
the sources of cash coming into the business (inflows)
§ Understand
the sources and destination of cash leaving the business (outflows)
§ Identify the
impact of timings of inflows and outflows
§ Understand
the benefits of using a cash flow forecast to plan for success in a business (e.g. to produce new goods/services, invest in new resources,
expand/reduce activities) and explain the associated risks to businesses
of not completing a cash flow forecast
§ Complete a cash flow forecast from given information, showing individual and total
inflows, individual and total outflows, net inflows and outflows, and opening
and closing balances
§ Analyse a
business’ finances based on cash flow information and identify possible issues
for the business from any cash surplus or deficit
