BUSINESS STUDIES
Finance Function
- Robert Shabalala
Learners should be able to define and discuss the role of the financial function by referring to:
• Own vs. borrowed capital
• Sources of finance, e.g. leasing
• Types of capital: long term vs short term capital and the factors that influence the demand for each
• Budgeting
• Basic interpretation of the Statement of Comprehensive Income (Income Statement) and the Statement
of financial Position (Balance Sheet)
• Feasibility studies when new products/ businesses are developed
• Costs and Revenue, Break-Even analysis
Part 1 Part 2
Scan us for more on this chapter!
,Table of Contents
TERMS AND DEFINITIONS ..................................................................................................................................................... 4
Finance Function .................................................................................................................................................................. 5
Triple bottom.................................................................................................................................................................... 5
King Code ...................................................................................................................................................................... 5
Own vs. Borrowed Capital: ............................................................................................................................................... 8
Own Income: ................................................................................................................................................................ 8
Borrowed Income: ........................................................................................................................................................ 8
Sources of Finance: Long-term vs Short-term .................................................................................................................. 9
1. Leasing: ..................................................................................................................................................................... 9
2. Instalment Sales: ...................................................................................................................................................... 9
3. Hire Purchase Agreements: .................................................................................................................................... 10
4. Rental Agreements: ................................................................................................................................................ 10
Long-term vs Short-term Financing: ........................................................................................................................... 10
Possible sources of credit in the short term include: ................................................................................................. 11
Factors Influencing the Demand for Each Source of Finance: .................................................................................... 12
Factors that will determine how much working capital a business will need. ........................................................... 12
Basic Interpretation of the Statement of Comprehensive Income (Income Statement) and the Statement of Financial
Position (Balance Sheet) ................................................................................................................................................. 14
Statement of Comprehensive Income (Income Statement) .......................................................................................... 14
What is it?................................................................................................................................................................... 14
Statement of Financial Position (Balance Sheet)........................................................................................................ 16
What is it?................................................................................................................................................................... 16
Feasibility Studies for New Products/Businesses ........................................................................................................... 18
Key Aspects of a Feasibility Study............................................................................................................................... 19
Benefits of Conducting a Feasibility Study ................................................................................................................. 20
Application to ZABA .................................................................................................................................................... 21
Factors Influencing Feasibility in ZABA's Case: ........................................................................................................... 21
Costs, Revenue, and Break-Even Analysis ...................................................................................................................... 22
Costs ........................................................................................................................................................................... 23
Fixed Costs: ................................................................................................................................................................. 23
Variable Costs: ............................................................................................................................................................ 23
Total Costs: ................................................................................................................................................................. 23
Revenue ...................................................................................................................................................................... 23
Break-Even Analysis.................................................................................................................................................... 24
ROI stands for Return on Investment. ............................................................................................................................ 26
, Importance of Insurance for a Business. ........................................................................................................................ 26
Insurance ........................................................................................................................................................................ 26
Assurance ....................................................................................................................................................................... 26
Investment Basics: .......................................................................................................................................................... 27
Five criteria a potential investor might consider when choosing between two different businesses: ...................... 28
Simple Interest: .......................................................................................................................................................... 28
Compound Interest: ................................................................................................................................................... 29
Bibliography........................................................................................................................................................................ 29
Finance Function
- Robert Shabalala
Learners should be able to define and discuss the role of the financial function by referring to:
• Own vs. borrowed capital
• Sources of finance, e.g. leasing
• Types of capital: long term vs short term capital and the factors that influence the demand for each
• Budgeting
• Basic interpretation of the Statement of Comprehensive Income (Income Statement) and the Statement
of financial Position (Balance Sheet)
• Feasibility studies when new products/ businesses are developed
• Costs and Revenue, Break-Even analysis
Part 1 Part 2
Scan us for more on this chapter!
,Table of Contents
TERMS AND DEFINITIONS ..................................................................................................................................................... 4
Finance Function .................................................................................................................................................................. 5
Triple bottom.................................................................................................................................................................... 5
King Code ...................................................................................................................................................................... 5
Own vs. Borrowed Capital: ............................................................................................................................................... 8
Own Income: ................................................................................................................................................................ 8
Borrowed Income: ........................................................................................................................................................ 8
Sources of Finance: Long-term vs Short-term .................................................................................................................. 9
1. Leasing: ..................................................................................................................................................................... 9
2. Instalment Sales: ...................................................................................................................................................... 9
3. Hire Purchase Agreements: .................................................................................................................................... 10
4. Rental Agreements: ................................................................................................................................................ 10
Long-term vs Short-term Financing: ........................................................................................................................... 10
Possible sources of credit in the short term include: ................................................................................................. 11
Factors Influencing the Demand for Each Source of Finance: .................................................................................... 12
Factors that will determine how much working capital a business will need. ........................................................... 12
Basic Interpretation of the Statement of Comprehensive Income (Income Statement) and the Statement of Financial
Position (Balance Sheet) ................................................................................................................................................. 14
Statement of Comprehensive Income (Income Statement) .......................................................................................... 14
What is it?................................................................................................................................................................... 14
Statement of Financial Position (Balance Sheet)........................................................................................................ 16
What is it?................................................................................................................................................................... 16
Feasibility Studies for New Products/Businesses ........................................................................................................... 18
Key Aspects of a Feasibility Study............................................................................................................................... 19
Benefits of Conducting a Feasibility Study ................................................................................................................. 20
Application to ZABA .................................................................................................................................................... 21
Factors Influencing Feasibility in ZABA's Case: ........................................................................................................... 21
Costs, Revenue, and Break-Even Analysis ...................................................................................................................... 22
Costs ........................................................................................................................................................................... 23
Fixed Costs: ................................................................................................................................................................. 23
Variable Costs: ............................................................................................................................................................ 23
Total Costs: ................................................................................................................................................................. 23
Revenue ...................................................................................................................................................................... 23
Break-Even Analysis.................................................................................................................................................... 24
ROI stands for Return on Investment. ............................................................................................................................ 26
, Importance of Insurance for a Business. ........................................................................................................................ 26
Insurance ........................................................................................................................................................................ 26
Assurance ....................................................................................................................................................................... 26
Investment Basics: .......................................................................................................................................................... 27
Five criteria a potential investor might consider when choosing between two different businesses: ...................... 28
Simple Interest: .......................................................................................................................................................... 28
Compound Interest: ................................................................................................................................................... 29
Bibliography........................................................................................................................................................................ 29
