Making a profit - learners should:
§ Define cost of sales the cost of
producing a product
§ Define gross profit the money made from
selling a product (revenue) after the cost of producing the product (cost of
sales) has been deducted
§ Calculate gross profit (formula will not be given in the assessment)
Gross Profit = Revenue – Cost of sales
§ Explain the impact of positive and
negative gross profit on businesses
§ Define net profit the money made from
selling a product after all costs (expenditure) have been deducted (formula
will not be given in the assessment)
§ Calculate net profit
Net Profit = Gross profit – Expenditure
§ Explain the impact of positive and
negative net profit on businesses
Measuring
success by looking at financial statements - learners should:
§ Understand what financial statements are
documents that record the financial activities of a business, sometimes
required by law, including income statement (profit and loss account) and
statement of financial position (balance sheet)
Income
statement (profit and loss account) - learners should:
§ Identify the purpose of a income
statement (profit and loss account) to show how
§ The business performed financially over a
period of time (usually one year)
Ø Trading
account (top section of the income statement) includes figures for revenue (turnover)
and cost of sales and calculates the amount of gross profit
Ø Expenses/overheads
(bottom section of the income statement)
Ø Calculating
net profit
Statement
of financial position (balance sheet) - learners should:
§ Identify the purpose of a statement of
financial position (balance sheet) to show the financial position of a business
at a point in time
§ Understand the format of a statement of
financial position (balance sheet)
§
Categorise total assets and liabilities
using a statement of financial position (balance sheet)
§
Understand that a statement of financial
position (balance sheet) shows at a point in time:
Ø how
a business is funded (capital)
Ø how
a business is using these funds (net assets)
§
Complete a statement of financial
position (balance sheet) with given figures for a small business (such as a
sole trader or partnership), identifying:
Ø Net
assets what the business owns, or is owed (debtors/trade receivables), including
fixed assets and short-term assets
Ø Liabilities
what the business owes to others (creditors/trade payables), including current
liabilities and long-term liabilities
Ø Capital
how the business is funded (money invested in the business to generate revenue)
from:
–
internal sources money from shareholders (share
capital) or retained profits
–
external sources bank loans or other
forms of finance that have to be repaid
Ø Working capital the amount of capital
used to run day-to-day activities (current assets minus current liabilities): if
this figure is negative, the business may have problems financing its day-to-day
activities
Topic C.2 Understand how
businesses can be more successful
Learners should:
§ Identify ways in which a business can
increase profits
§ Analyse financial statements for a small
business (such as a sole trader or partnership) and suggest appropriate actions
the business can take to succeed
