Unit 3
Finance & Accounts
Select a topic to view class notes, key terms, worked examples and exercises. HL only content is clearly labelled throughout.
3.1
Introduction to Finance
The role of finance for businesses. Capital vs. revenue expenditure.
3.2
Sources of Finance
Internal sources (retained profit, asset sales) and external sources (shares, loans, crowdfunding…). Short vs. long term.
3.3
Costs and Revenues
Fixed, variable, direct and indirect costs. Total revenue and revenue streams.
3.4
Final Accounts
Profit & loss account, balance sheet, intangible assets. Depreciation methods (HL).
3.5
Profitability & Liquidity Ratios
Gross profit margin, profit margin, ROCE. Current ratio and acid test ratio.
3.6
Efficiency Ratio Analysis
Stock turnover, debtor days, creditor days, gearing ratio. Insolvency vs. bankruptcy.
HL only 3.7
Cash Flow
Profit vs. cash flow, working capital, liquidity position, cash flow forecasts.
3.8
Investment Appraisal
Payback period, average rate of return (ARR), and net present value / NPV (HL).
3.9
Budgets
Cost and profit centres. Constructing budgets. Variances and decision-making.
HL only 5.5
Break-Even Analysis
Contribution, break-even output, margin of safety, target profit, and break-even charts.