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Lesson2

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Lesson2

  1. 1. BTEC Extended Diploma in Business Interpretation of ratios How to determine the financial health of an organisation BTEC Extended Diploma - Unit 5 - 1 Sharron Holding
  2. 2. Learning outcomes:• By the end of this lesson you must be able to:-• Describe how to record transactions, monitor activity, control management of the business (planning, monitoring, controlling)• Measurement of financial performance (gross profit, net profit, value owed to and by the business)• Categorise Capital income: sole traders; partners; shares;SharronDiploma mortgages loans; - Unit 5 - BTEC Extended Holding 2
  3. 3. BTEC Extended Diploma - Unit 5 - 3 Sharron Holding
  4. 4. Record Transactions• Work in pairs• Using the cards provided match up the - activity - purpose - and suggest the person responsible for the activity Take 10 minutes BTEC Extended Diploma - Unit 5 - 4 Sharron Holding
  5. 5. Fill in the missing words• Work individually – take max. 10 minutes• Compare your answers with your neighbour• Check – are you right? BTEC Extended Diploma - Unit 5 - 5 Sharron Holding
  6. 6. Measurement of financial performance• Financial records allow a business to identify if they are making a profit or loss.• Profit is identified as GROSS PROFIT or NET PROFIT ACTIVITY BTEC Extended Diploma - Unit 5 - 6 Sharron Holding
  7. 7. Money matters – what is the difference between the following?• Value owed to the business• Value owed by the business BTEC Extended Diploma - Unit 5 - 7 Sharron Holding
  8. 8. What happens if money is going out at a higher pace than the money coming in? BTEC Extended Diploma - Unit 5 - 8 Sharron Holding
  9. 9. Reminder – you are expected to:• Be able to examine a specific type of organisation and identify the likely income and revenue and indicating in each case whether it is of a capital or revenue nature. You must also be able to describe clearly what each category means. BTEC Extended Diploma - Unit 5 - 9 Sharron Holding
  10. 10. Capital income• Capital income is the money invested by the owners or other investors that is used to set up a business or buy additional equipment Research time BTEC Extended Diploma - Unit 5 - 10 Sharron Holding
  11. 11. Revenue Income• Revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers a.k.a turnover BTEC Extended Diploma - Unit 5 - 11 Sharron Holding
  12. 12. Revenue Income• Some companies receive revenue from interest, dividends or royalties paid to them by other companies BTEC Extended Diploma - Unit 5 - 12 Sharron Holding
  13. 13. What is Capital expenditure?• Capital expenditures (CAPEX or capex) are expenditures creating future benefits, capex is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year. CAPEX is used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings BTEC Extended Diploma - Unit 5 - 13 Sharron Holding
  14. 14. Capital expenditure• fixed assets (land and buildings; office equipment; machinery; furniture and fittings; motor vehicles); intangibles, eg goodwill, patents, trademarks BTEC Extended Diploma - Unit 5 - 14 Sharron Holding
  15. 15. Freddies Frames BTEC Extended Diploma - Unit 5 - 15 Sharron Holding
  16. 16. A-Z• Working individually begin a dictionary A-Z of accounting words together with a definition (covered so far) – you will improve on your dictionary week by week so consider the presentation and quality of your work.• Now work in pairs to share your results BTEC Extended Diploma - Unit 5 - 16 Sharron Holding
  17. 17. Lesson Outcomes BTEC Extended Diploma - Unit 5 - 17 Sharron Holding

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