Management Process

1. Operations

• Transforming raw materials (inputs) into finished products (outputs)

2. Finance: Sources/Expenditure of funds

• Sales revenue, Borrow (debt finance), Owners Contribution (equity finance)

3. Marketing: Plan, price, promote + distribute products

4. Human Resources (HR): Relation between employees and employers.

Cash Flow Statement

Shows the flow of cash into and out of a business during a period of time.  It reports the amount of cash coming in and the amount of cash going out during a period.

Cash inflows - Money coming into the business. E.g. Selling goods and services

Cash outflows - Money going out of the business. E.g. Paying Dividends and tax

Net Cash Flows - Difference between cash inflows and cash outflows

The Income Statement

A fundamental tool used by a business that shows the income and expenditure of a business over a period of time, and can be used to calculate profit.

• Also known as profit and loss statement OR revenue statement.

• Compares the amount of sales with the actual cost of the goods sold

• Analyse it’s costs

• Identify all expenses in the business

The Balance Sheet

Assets = Liabilities + Owners equity

Gives information of a businesses assets, liabilities and owner’s equity at a given point of time.

Called a balance sheet as it balances the firm’s assets against liabilities and owner’s equity.

Assets are items of value owned by a business.

• Current assets (Can be turned into cash in a year) - cash, inventory

• Non Current assets (assets that takes longer than a year to be turned into cash)- house, car

Liabilities are what a business owes and can be divided into two groups.

• Current liabilities - Can be repaid within a year

• Non-Current liabilities - Takes more than a year to repay.

Owners Equity is the money contributed by the owners of the business.

OE = capital + net profit - drawing

Drawing is money taken from a business by an owner for their own personal use.