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Principles of 
Business 
Introduction to Finance – 
Seminar 4: Financial statements
Learning outcomes 
By the end of this session you should be able to: 
2 
• Explain the role and purpose of each of the main 
financial statements 
• Explain the nature of the financial statements 
• Understand the limitations of financial statements
Review of pre-seminar work 
- Seminar 4: Managing costs in a business 
- Read chapter 8 of core textbook and attempt 
questions at back of chapter 
3
4 
A recap on costs 
• Direct costs 
• Indirect costs 
• Variable costs 
• Fixed costs
5 
Task 1: 
In pairs, come up with examples of each of the following types of cost: 
• Direct variable cost 
• Direct fixed cost 
• Indirect fixed cost 
• Indirect variable cost
6 
Task 2: 
1. Using the information that you used in Finance seminar 1 this week, have a 
go at categorising the costs of your business into: 
• Direct costs 
• Indirect costs 
• Variable costs 
• Fixed costs 
2. Suggest ways that you could manage and minimise some of the costs that 
you have identified.
Task 3: Breakeven analysis 
Fixed costs 
(Selling price – variable cost per unit) 
7 
• Lets try question 9.2 in the core text book (Atrill & McClaney) together 
Applying break even to real life companies: 
• You can get a rough approximation of breakeven for real life companies 
if: 
• You know the average price for a product (from website) 
• You know the revenue figure (per financial statements) then you can 
calculate approximate number of units sold 
• You know approximate fixed costs (using the same technique as in 
question 9.2)
8 
End of seminar

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Financial statements - Seminar 4

  • 1. Principles of Business Introduction to Finance – Seminar 4: Financial statements
  • 2. Learning outcomes By the end of this session you should be able to: 2 • Explain the role and purpose of each of the main financial statements • Explain the nature of the financial statements • Understand the limitations of financial statements
  • 3. Review of pre-seminar work - Seminar 4: Managing costs in a business - Read chapter 8 of core textbook and attempt questions at back of chapter 3
  • 4. 4 A recap on costs • Direct costs • Indirect costs • Variable costs • Fixed costs
  • 5. 5 Task 1: In pairs, come up with examples of each of the following types of cost: • Direct variable cost • Direct fixed cost • Indirect fixed cost • Indirect variable cost
  • 6. 6 Task 2: 1. Using the information that you used in Finance seminar 1 this week, have a go at categorising the costs of your business into: • Direct costs • Indirect costs • Variable costs • Fixed costs 2. Suggest ways that you could manage and minimise some of the costs that you have identified.
  • 7. Task 3: Breakeven analysis Fixed costs (Selling price – variable cost per unit) 7 • Lets try question 9.2 in the core text book (Atrill & McClaney) together Applying break even to real life companies: • You can get a rough approximation of breakeven for real life companies if: • You know the average price for a product (from website) • You know the revenue figure (per financial statements) then you can calculate approximate number of units sold • You know approximate fixed costs (using the same technique as in question 9.2)
  • 8. 8 End of seminar

Editor's Notes

  1. Recap from the lecture Ask them why
  2. Direct variable cost – materials Direct fixed cost – salaried / contracted production staff Indirect fixed costs - management / marketing team salaries Indirect variable costs – Canteen costs at Google (more services = more staff = more costs) Ask them why
  3. Direct variable cost – materials Direct fixed cost – salaried / contracted production staff Indirect fixed costs - management / marketing team salaries Indirect variable costs – Canteen costs at Google (more services = more staff = more costs) Ask them why
  4. Worth spending a few minutes introducing break even analysis to them – it’s a useful tool for budding entrepreneurs. If time, get them to pick a company and have a go at approximating their Breakeven point