Unit 2 – Finance for Business .
All businesses have to spend money before they can make a profit, and when they spend money, they incur costs. In this unit, you will explore the types of costs that businesses incur, from the initial start-up costs involved in setting up a business to the ongoing daily costs of running the business. You will then explore the ways in which the sale of products and services generates revenue, so that you can develop your understanding of profit.
Next, you will examine how businesses plan for success and learn about the techniques used to assist the planning process. In particular, you will learn how to calculate the break-even point – the point at which sales equal costs (fixed and variable). All sales over the break-even point produce profits, while any drop in sales below that point will produce losses. You will be introduced to the benefits of breakeven analysis to ensure that a business knows how and when to prevent losses.
As well as profit, cash is an important factor in business success. It is vital for any business to ensure that it budgets correctly and that it knows what money is coming in to the business and what needs to be paid out, and when. In this unit, you will learn how to use budgets and cash flow forecasts to deal with these important issues.
The final part of the unit explores the ways in which businesses measure success and identify areas for improvement. You will understand how gross profit and net profit are calculated and you will learn about the relationship between sales, cost of sales and gross profit. You will analyse key financial statements (e.g. profit and loss accounts, balance sheets) and review their importance in the successful financial management of a business.
The link below directs you to an example of the online assessment. Use it to familiarize you with the examination and to check your knowledge of the topics covered.
Online assessment click here
Mark Scheme for example 1 is below, look at pages 6-10 only.
Here is another example of questions you could be asked
Here is the marks scheme for example 2
Here is another example of the test
This is the marks scheme for example 3
Resources for Unit 2
Here are some resources to help you understand the finance topics covered in this unit
Types of costs
What is profit
How to calculate profit
What is revenue
What is cashflow
What is budgeting
What is break even
A break even chart
What is an income statement or profit and loss account or trading account
What is a balance sheet
Notes on balance sheets
Formulas you need to know
Here are videos which are a little more detailed but could be useful
Watch this video on Break-even. http://www.bbc.co.uk/schools/gcsebitesize/business/production/breakevenanalysisrev3.shtml
How to produce a cashflow forecast. Then try out this quick test
Watch this short video on Profit and Loss. Remember, the 'direct costs' in the video are also called 'cost of sales'. http://www.bbc.co.uk/schools/gcsebitesize/business/finance/accountingprinciplesrev2.shtml
Watch below for information on Balance Sheets. Note: inventory is stock