[Link].
Materials and Manufacturing
Management
Introduction to
Finance
Purpose of the Module
The purpose of this unit is to look at the process and
relationship between marketing and financial
management and to consider how the data produced
by the two functions can be used in the decision
making process. The unit will also demonstrate the
nature and use of techniques for internal reporting,
control and decision making in both finance and
marketing. The unit will provide students with a
range of techniques that will assist them in
understanding and managing an organisation and its
relationship with its markets
Tonight Task
Explain the two branches of accounting.
Identify the main financial statements.
What's the difference between profit and
cash ?
Explain why engineers need to understand
accountancy.
[Link]. Finance
Purpose of the Accounting System
Record data regarding the financial activities
of the firm
Provide information to the owner/ manager of
the firm so that they can effectively manage
the enterprise
[Link]. Finance
But why me?
In fours why to you need to study finance?
The Accounting Function
Financial Accounting
Management Accounting
Financial Accountant
Performance of Company Flow of Funds Value of Company
Income Statement Cash Flow Statement Balance Sheet
The Balance Sheet
The value of the business to the owner
How would you value a company
- List what the firm owns (assets)
and
-List what it owes (liabilities)
Balance Sheet of a Company as at a
date.
Assets
Shop Premises 15000
Stock 3000
Cash 200
18200
Liabilities
Bank Loan 3000
The Balance Sheet
So how much is the business worth to the
owner?
Assets – Liabilities
Owners Capital = 15200
The Accounting Equation; A=L+C
Balance Sheet Classifications
Fixed Assets
Current Assets
Current Liabilities
Capital
Have a Go !
The owner takes £5000 of his own money
and buys a van which will be used solely in
the business. Produce a revised balance
sheet.
The business sells £100 worth of stock for
£120 cash. Produce a revised balance sheet.
Balance Sheet of a Company as at a
date.
Assets Van 5000
Shop Premises 15000
Stock 3000
Cash 200
23200
Liabilities
Bank Loan 3000
Balance Sheet of a Company as at a
date.
Assets Van 5000
Shop Premises 15000
Stock 2900
Cash 320
23220
Liabilities
Bank Loan 3000
The Income Statement
Purpose – To match expenses with revenue
for an accounting period and to calculate the
performance of the firm over the period.
The Income Statement - Structure
Sales
Less Cost of Goods Sold
Gross Profit
Less Other Expenses
Net Profit
Income Statement of J Blow for the
year ended xx/xx/xx.
£ £
Sales 50000
Opening Stock 1900
Purchases 40000
41900
Less closing Stock 11900
Cost of Goods sold 30000
Gross Profit 20000
Heat and Light 1000
Motoring Expenses 1500
-2500
Net Profit 17500
Income Statement - Profit
Gross profit – The level of gross profit
depends upon two factors the mark up on the
profit and the level of sales.
Net profit – The profit remaining after all
expenses have been charged against gross
profit. It is the return to shareholders and is
liable to tax.
Cash Flow Statement
The financial viability and survival of any
business rests on the ability to generate net
positive cash flow.
The purpose of the cash flow statement is to
explain how the firm's cash position has
changed over the year.
Why profit does not = cash
Firms trade using credit.
Capital Expenditure does not appear in the
income statement
Some items in the income statement do not
involve cash.
Recap
Explain why engineers need to understand
accountancy.
Explain the two branches of accounting.
Identify the main financial statements.
What's the difference between profit and
cash ?
