Unit 2: Finance fr Business Scheme f wrk Guided learning hurs (GLH): 30 Number f lessns: 15! Duratin f lessns: 2 hurs Lessn Unit cntent* Activities Links t ther units Resurce checklist Learning aim A: Understand the csts invlved in business and hw businesses make a prfit 1 Tpic A.1 Understand the csts invlved in business Understand and identify csts f a business, including: start-up csts perating (running) csts Understand, define and identify the differences between fixed and variable csts, direct and indirect csts, ttal csts Calculate ttal csts: ttal csts = fixed csts + variable csts Teacher/tutr t make clear there are n assignments, but there will be plenty f practice utside f class as an effective way t learn and remember this unit. Class discussin: Learners persnal csts and thse f their family. Class discussin: What srts f csts culd a business have? Tutr/teacher input: Difference between variable and fixed csts (using learner examples) and hw ttal csts are calculated. Individual activity: Learners t cmplete exercises calculating csts f a business. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Unit 1: Enterprise in the Business Wrld Calculatrs Pearsn Educatin Ltd 2014.! 1
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 2 Tpic A.2 Understand hw businesses make a prfit Teacher/tutr input: Review any wrk that has been cmpleted utside class. Unit 1: Enterprise in the Business Wrld Cmputers with internet access Understand and identify hw businesses make mney frm selling their prducts r services Individual activity: Learners t cmplete exercises calculating revenue and expenditure. Calculatrs Identify surces f revenue fr a business Calculate revenue: revenue = number f sales price per unit Describe hw businesses have t spend mney t succeed Identify types f expenditure (including verheads) businesses may have Class discussin: What kinds f verheads might a business have? Recrd items identified at frnt f class. Discussin shuld draw ut why it s imprtant fr businesses t spend mney. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Understand that expenditure is anything a business pays ut and verheads are the everyday running csts f a business Pearsn Educatin Ltd 2014.! 2
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 3 Tpic A.2 Understand hw businesses make a prfit understand that businesses must knw hw much mney is cming in (revenue) and ging ut (expenditure), befre they can wrk ut whether the business has: made a prfit made a lss define: prfit revenue is mre than expenditure lss expenditure is mre than revenue calculate prfit prfit = revenue expenditure Learning aim B: Understand hw businesses plan fr success Teacher/tutr input: Review any wrk that has been cmpleted utside class. Class discussin: Review revenue exercises frm lessn 2 as a starting pint fr this lessn. Individual activity: Learners t cmplete exercises calculating prfit and lss. Give tutr guidance as needed. Use simple examples f prfit and lss. Fr example, a car bt sale, a raffle r a market stall. Individual activity: Practice activities using examples based n cmpanies which learners knw. Cmpare the prfits f different rganisatins and encurage learners t research them n the internet. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Cmputers with internet access Sme examples f prfit data frm large cmpanies Calculatrs Pearsn Educatin Ltd 2014.! 3
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 4 Tpic B.1 Understand the planning tls businesses use t predict when they will start making a prfit define breakeven breakeven = fixed csts (selling price per unit variable cst per unit) be able t interpret frm a break-even chart: break-even pint prfit lss variable csts fixed csts ttal revenue ttal csts margin f safety Teacher/tutr input: Review any wrk that has been cmpleted utside class. Classrm activity: Learners shuld lk at sme charts already prepared, and identify each f the items n the chart. Grup activity: Fr each item n the list after the break-even pint (apart frm margin f safety), use questins and answers with the grup t check understanding frm previus lessns, and ask them t give examples. Teacher/tutr input: Prvide a hand-ut explaining margin f safety and breakeven pint and give examples: A business can wrk ut the vlume f sales it needs t achieve t cver its csts. This is knwn as the break-even pint. The margin f safety is hw much utput r the sales level can fall befre a business reaches its break-even pint. Individual activity: Learners t cmplete exercises where they will need t create and analyse break-even charts. Give tutr guidance if needed. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Examples f breakeven charts Calculatrs Pearsn Educatin Ltd 2014.! 4
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 5 Tpic B.1 Understand the planning tls businesses use t predict when they will start making a prfit Calculate the breakeven Analyse and explain the value and imprtance f breakeven analysis t businesses when planning fr success Analyse and explain the assciated risks t businesses f nt cmpleting a breakeven analysis Teacher/tutr input: Review any wrk that has been cmpleted utside class. Individual activity: Learners t cmplete exercises using a frmula t calculate the break-even pint. Give tutr guidance as necessary. Althugh the frmula will be given in the assessment, it is imprtant that learners understand the lgic f the frmula and remember it themselves. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Calculatrs Pearsn Educatin Ltd 2014.! 5
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 6 Tpic B.1 Understand the planning tls businesses use t predict when they will start making a prfit Present given infrmatin graphically n a break-even chart Analyse the effect n the break-even pint if sales r (fixed and variable) csts change, and explain the impact f these changes n the business Teacher/tutr input: Review any wrk that has been cmpleted utside class. Class activity: Review ne f the charts that were examined in lessn 4 and discuss hw each line is pltted. Give learners the riginal data s they can cnstruct the same chart and make cmparisns. Individual activity: Several practice exercises in which they have t name and quantify in units and mney: break-even pint prfit lss variable csts fixed csts ttal revenue ttal csts margin f safety Set wrk t be cmpleted utside class. Fr example, a practice exercise r Graph paper Breakeven exercises Calculatrs Pearsn Educatin Ltd 2014.! 6
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 7 Tpic B.2 Understand the tls businesses use t plan fr success Budgeting: Understand the purpse f budgeting in setting expenditure and revenue budgets Understand the difference between budgeting and budgetary cntrl (checking perfrmance against plan) 8 Tpic B.2 Understand the tls businesses use t plan fr success Cash flw frecasting: Knw the purpse f a cash flw frecast Be able t identify inflws and utflws Explain the purpse f a cash flw frecast Understand the surces f cash cming int the business Understand the surces and destinatin f cash leaving the business Identify the impact f timings f inflws and utflws Teacher/tutr input: Review any wrk that has been cmpleted utside class. Class discussin: Using the Chancellr s budget as an example, learners shuld discuss why this is necessary and why taxes smetimes g up, fr example, if the gvernment realise that mre revenue is needed. Teacher/tutr input: Give ther simple examples f budgets. Individual activity: Learners t cmplete exercises calculating budgets and explaining budgetary cntrl. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Teacher/tutr input: Review any wrk that has been cmpleted utside class. Individual activity: Learners t d cash flw frecasting exercises based n the cash in and ut f a typical teenager s budget. The tutr/teacher shuld prvide the figures, which shuld include hlidays, presents, mbile phne csts, etc. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Simple representatin f the Chancellr s budget f the previus year Calculatrs Cmputers with internet access and sftware fr spreadsheet use Calculatrs Pearsn Educatin Ltd 2014.! 7
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 9 Tpic B.2 Understand the tls businesses use t plan fr success Cash flw frecasting: Understand the benefits f using a cash flw frecast t plan fr success in a business and explain the assciated risks t businesses f nt cmpleting a cash flw frecast Cmplete a cash flw frecast frm given infrmatin, shwing individual and ttal inflws, individual and ttal utflws, net inflws and utflws, and pening and clsing balances Analyse a business s finances based n cash flw infrmatin and identify pssible issues fr the business frm any cash surplus r deficit Teacher/tutr input: Review any wrk that has been cmpleted utside class. Class discussin: Learners shuld identify the imprtance f cash flw fr a business, fr example, planning fr expenditure s that the business desn t end up withut enugh cash. Draw n relevant case studies frm the business wrld, especially if a business knwn t learners has suffered a cash flw shrtage. Individual activity: Learners t cmplete exercises calculating cash flw frecasting. IA: Learners cmplete the interactive activities. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Calculatrs Learning aim C: Understand hw businesses measure success and identify areas fr imprvement 10 Tpic C.1 Understand hw businesses measure success Making a prfit: Define cst f sales the cst f prducing a prduct Define grss prfit the mney made frm selling a prduct (revenue) after the cst f prducing the prduct (cst f sales) has been deducted Calculate grss prfit: grss prfit = revenue cst f sales Teacher/tutr input: Review any wrk that has been cmpleted utside class. Tutr/teacher input and class discussin: Intrduce cst f sales and grss prfit. Check learner understanding and explre cncepts. Individual activity and class discussin: Learners t cmplete activities n grss prfit and discuss results with the class. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Calculatrs Pearsn Educatin Ltd 2014.! 8
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 11 Tpic C.1 Understand hw businesses measure success Making a prfit: Explain the impact f psitive and negative grss prfit n businesses Define net prfit the mney made frm selling a prduct after all csts (expenditure) have been deducted Calculate net prfit: net prfit = grss prfit expenditure Explain the impact f psitive and negative net prfit n businesses Measuring success by lking at financial statements: Understand what financial statements are dcuments that recrd the financial activities f a business, smetimes required by law, including incme statement (prfit and lss accunt) and statement f financial psitin (balance sheet). Teacher/tutr input: Review any wrk that has been cmpleted utside class. Teacher/tutr input: This tpic will need lts f practice s build up slwly with simple examples f making a prfit with few verheads, fr example, a car bt sale, a raffle r a market stall. It is imprtant t emphasise that prfit is nt always the same as cash. Explain why businesses need t display their statements in a frmal way, and then discuss wh might want t see them. Individual activity: Learners t cmplete exercises calculating grss and net prfit. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Calculatrs Pearsn Educatin Ltd 2014.! 9
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 12 Tpic C.1 Understand hw businesses measure success Incme statement (prfit and lss accunt): Identify the purpse f an incme statement t shw hw the business perfrmed financially ver a perid f time (usually ne year) Cmplete an incme statement frm given figures, including: trading accunt includes figures fr revenue and cst f sales and calculates the amunt f grss prfit expenses/verheads calculating net prfit. Teacher/tutr input: Review any wrk that has been cmpleted utside class. Teacher/tutr input: Identify what might g in an incme statement review wrk n revenue and expenditure. Relating it t small businesses will prvide a useful link t business enterprise. Use f the Nw Let s Get Started website (listed ppsite) may be helpful. Class exercise: Give learners sme practice exercises t cmplete. Remember, sme learners may have a barrier t anything t d with numbers. Practice will shw them that there is a lgical system t fllw and that the mathematics required is nt difficult. Individual activity Learners t cmplete exercises n incme statements. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Calculatrs Nw Let s Get Started a website cntaining infrmatin and tls fr new businesses: www.nwletsgetstart ed.c.uk/ understanding_prfit _and_lss_accunts.aspx Pearsn Educatin Ltd 2014.! 10
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 13 Tpic C.1 Understand hw businesses measure success Statement f financial psitin (balance sheet) Identify the purpse f a statement f financial psitin Understand the frmat f a statement f financial psitin Categrise ttal assets and liabilities using a statement f financial psitin Understand that a statement f financial psitin shws at a pint in time: hw a business is funded (capital) hw a business is using these funds (net assets). Teacher/tutr input: Review any wrk that has been cmpleted utside class. Teacher/tutr input: Intrduce the cncept f assets and liabilities. Explain that they will always be equal because assets are bught either with cash frm the bank r by creating liabilities. Use simple examples t shw this. Fr example, ask the grup what they have bught recently and ask them t identify these items as assets and liabilities. Then ask learners t identify the assets and liabilities a business might have. Individual activity: Learners t cmplete activities n assets, liabilities and wrking capital. Teacher/tutr input: Shw learners sme simple balance sheets fr well-knwn rganisatins, but emphasise that learners will d simpler versins. Set wrk t be cmpleted utside class. Fr example, learners culd lk up simple balance sheets n the internet and bring in examples fr the next lessn. Calculatrs Pearsn Educatin Ltd 2014.! 11
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 14 Tpic C.1 Understand hw businesses measure success Cmplete a statement f financial psitin (balance sheet) with given figures fr a small business (such as a sle trader r partnership), identifying: net assets what a business wns r is wed, including fixed and shrt-term assets liabilities what the business wes t thers, including current liabilities and lng-term liabilities capital hw the business is funded frm: internal surces mney frm sharehlders r retained prfits external surces bank lans r ther frms f finance that have t be repaid wrking capital if this figure is negative, the business may have prblems financing its day-t-day activities. Teacher/tutr input: Review any wrk that has been cmpleted utside class. Teacher/tutr input: Review the terminlgy in lessn 13. Differentiate between: current and fixed assets shrt- and lng-term liabilities internal and external surces. Teacher/tutr input: Shw learners balance sheets that have already been cnstructed (yu culd cmpare them t nes they have fund themselves). Class discussin: Discuss the cncept f net current assets and why it is s imprtant t cntrl these funds. As befre, start by talking abut persnal finances and what happens if an individual builds up t much shrt-term debt, then apply this t businesses. Individual activity: Learners t cmplete activities n statements f financial psitin. Give tutr guidance as needed. Set wrk t be cmpleted utside class. Fr example, a practice exercise r Calculatrs Examples f balance sheets Pearsn Educatin Ltd 2014.! 12
Unit 2: Finance fr Business Lessn Unit cntent* Activities Links t ther units Resurce checklist 15 Tpic C.2 Understand hw businesses can be mre successful Identify ways in which a business can increase prfits Analyse financial statements fr a small business (such as a sle trader r partnership) and suggest apprpriate actins the business can take t succeed. * See the specificatin fr full details f unit cntent. Teacher/tutr input: Review any wrk that has been cmpleted utside class and set further activities fr any areas that learners need mre practice. Individual activity: Learners t cmplete exercises n analysing financial statements and suggesting ways fr businesses t increase prfits.!! Pearsn Educatin Ltd 2014.! 13