Interpretation of simple inventory control charts
- Be able to draw chart and label
- Buffer stock
- Maximum inventory level
- Reorder level
- Lead time
- Buffer inventory level
Inventory control methods including buffer inventory and
Just in Time (JIT)
- Buffer inventory
- Enables continuation of products but is costly
- High BI = expensive but never runs out
- Low = low holding cost but high management cost
- JIT
- Requires su-pplies to arrive just as needed, only produces to order
- Needs good suppliers relationships, skilled labour, flexible machinery
- Low costs but supply delays can be devastatingly costly
☆ U5: FINANCE AND ACCOUNTING --
THE NEED FOR BUSINESS FINANCE
☆
Start up capital, capital for expansion
Why businesses need finance to start up and to grow
- Start-up = expenses precede revenue, hence the need for SUC
- To grow = need more equipment and location to accommodate more sales
, Why different needs for finance might mean different sources
are appropriate
- ST needs = quick expenses needed
- LT projects = prolonged and sustainable for business
Working capital
The meaning and significance of working capital as a source
of finance
- +WC = current assets > current liabilities; too much → CAs wasted in opportunity costs
- -WC = illiquid
- The WC cycle = time between purchasing inputs and getting paid for final product
Significance of the distinction between revenue expenditure
and capital expenditure
- RE = $ used everyday, ST costs - income statement expenses
- CE = $ used for fixed assets - shown on statement of financial position
Sources of finance
Legal structure and sources of finance
The relationship between the legal structure of a business
and its sources of finance
- Legal structure - only limited companies have share capital; only plcs can do flotation
- Size of business
- Amount needed
- Time
- Be able to draw chart and label
- Buffer stock
- Maximum inventory level
- Reorder level
- Lead time
- Buffer inventory level
Inventory control methods including buffer inventory and
Just in Time (JIT)
- Buffer inventory
- Enables continuation of products but is costly
- High BI = expensive but never runs out
- Low = low holding cost but high management cost
- JIT
- Requires su-pplies to arrive just as needed, only produces to order
- Needs good suppliers relationships, skilled labour, flexible machinery
- Low costs but supply delays can be devastatingly costly
☆ U5: FINANCE AND ACCOUNTING --
THE NEED FOR BUSINESS FINANCE
☆
Start up capital, capital for expansion
Why businesses need finance to start up and to grow
- Start-up = expenses precede revenue, hence the need for SUC
- To grow = need more equipment and location to accommodate more sales
, Why different needs for finance might mean different sources
are appropriate
- ST needs = quick expenses needed
- LT projects = prolonged and sustainable for business
Working capital
The meaning and significance of working capital as a source
of finance
- +WC = current assets > current liabilities; too much → CAs wasted in opportunity costs
- -WC = illiquid
- The WC cycle = time between purchasing inputs and getting paid for final product
Significance of the distinction between revenue expenditure
and capital expenditure
- RE = $ used everyday, ST costs - income statement expenses
- CE = $ used for fixed assets - shown on statement of financial position
Sources of finance
Legal structure and sources of finance
The relationship between the legal structure of a business
and its sources of finance
- Legal structure - only limited companies have share capital; only plcs can do flotation
- Size of business
- Amount needed
- Time
