New to AS Business ( BUSS1/BUSS2) | Step Up to A2 Business (BUSS3 / BUSS4)
Revision Quiz - Breakeven Basics
This new revision quiz on Breakeven Basics is designed for GCSE & equivalent courses.
Launch Revision Quiz - Breakeven Basics
Co Op Bank’s USP vanishing trick
One of the strengths and a key component in the Co-Op Bank's USP after recent banking problems - sub-prime lending, collapse of Northern Rock and LIBOR rate fixing, was its emphasis of ethical banking.
http://www.co-operativebank.co.uk/
Revision Quiz - Managing Stocks
This revision quiz looks at the basics of stock management and its role in lean production.
Launch Revision Quiz - Managing Stocks
Shocker or Cracker? BYOD and find out
Seeking a way to make costs, revenue and profits interesting for my business students and get them digging deep into the reality of cost control, revenue generation I developed the "Shocker or Cracker?" activity.
This requires students to conduct independent research within the classroom using their own electronic devices (laptop, tablet or samrtphone) and helps to generate a healthy sense of competition.
There has been increasing debate about the merits of adopting a Bring Your Own Device (BYOD) policy within schools and colleges so I thought I'd give it a go...
read more...»Return on Capital: a snapshot of British Business
Whenever you are investigating a firm’s accounts – perhaps using ratio analysis – you quickly realise that the answers you’re generating only really make sense when you compare them against something, like last year’s figures, or those of a rival.
My students are looking at a case study (OCR F297) in which a firm is making a return on capital of approximately 11%. We were wondering if that was a ‘good’ return or not. I’ve come across an article that directly answers that question, and raises some other points that offer a revealing insight into the health of Britain’s businesses.
read more...»What does Apple plan to spend $100bn on?
Some interesting finance news here, since Apple don’t plan to spend their famous cash mountain on a conventional purchase. Instead, they plan to raise dividends and buy back their own shares. Why?
read more...»Low Contribution & High Fixed Costs - the Problems for Nintendo’s Wii U
A classic example here of how earning a low contribution per unit can lead to big problems for a business if it does not sell high-enough volumes - particularly when fixed costs are high.
Nintendo's new "next-generation" console retails in the key US market for a selling price of $299. However, the (variable) cost of the components used and assembly are pretty close to the selling price, which leaves little if any scope for Nintendo to make a contribution on each console unit sold. Don't forget, it also needs to allow its retail and other distributors to earn a satisfactory margin too.
Of course Nintendo can recoup much of the cost back through lucrative royalty payments from games-developers who are licenced to develop for the new console.
But the big problem for Nintendo would be if the Wii U fails to sell in large quantities. The early indications of consumer demand do not look good...
This excellent short video from CNN takes a look at the variable costs of making the Wii U.
read more...»The importance of ICT and electronic banking services
Many AS Business candidates are asked about this question, and perhaps one of the most helpful ways of looking at this topic is seeing what happens when things go wrong. The latest headache was a short disruption only this week at RBS, and is covered by the BBC and The Guardian.
read more...»Sony sells iconic office block as part of turnaround strategy
Sony has sold part of its heritage and culture as part of Kazou Hirai's dramatic turnaround strategy with the sale and leaseback of one of its main buildings in Tokyo for 111.1 billion yen (£794m)
According to Sony's official press release regarding the property sale:
"Sony is transforming its business portfolio and reorganizing its assets in an effort to strengthen its corporate structure. This sale was conducted as a part of this reorganization."
This isn't the first time that Sony has opted for the use of sale and leaseback as a way of raising finance. in January 2013 Sony raised $1.1bn from the sale and leaseback of its corporate headquarters in New York.
The asset sales are designed to generate cash and repay Sony's high debts, which in turn are part of a major restructuring programme introduced by Hirai. He came into the job in Spring 2012 stating that "Sony must change: Sony will change".
The Urge to Merge
Could businesses rediscover an enthusiasm for mergers, which was largely lost after the last merger bubble burst in the run up to the financial
crisis of 2008?
According to The Economist, some of the right conditions are in place. Interest rates remain very low, and most mergers are built on the back of borrowed money. At the same time (to the surprise of many) a lot of firms are sitting on vast cash reserves. Perhaps all that is needed now is the appetite for risk that is probably behind many of these bold moves, at least in the past.
read more...»Raising finance for startups - the real-life Dragons
This is a useful short video from the BBC which illustrates the process of business angel investing.
There is a strong flow of entrepreneurs who attempt to raise capital by pitching their companies to so-called angel investors. So what are the investors looking for before they part with their cash? And how helpful is the process for the entrepreneurs themselves?
read more...»Blackberry’s Last Hope - What it costs to make the Z10
Many seasoned industry observers believe that RIM's survival hopes rest on the recent launch of the Z10 - the new Blackberry smartphone designed to compete directly with the iPhone 5 and Samsung's range.
RIM needs the new phone to generate some pretty significant profits and a key part of that will be achieving a strong gross profit margin in a highly competitive, price-sensitive market.
In this video, the basic manufacturing unit costs of the Z10 have been analysed and compared with the iPhone 5. What are the results?
read more...»Cash flow management - make sure you employ good people!
A key part of effective cash flow management is having the right people managing the cash!
In this video, Innocent Drinks co-founder, Adam Balon speaks at a recent business seminar on their experience of managing the cash flows from customers (retailers) in the early days of Innocent. Innocent Drinks got into some serious cash flow problems arising from poor financial control over working capital management. The key learning point - make sure that the people involved in financial management are of high quality.
read more...»What do we learn from football ‘rich lists’?
I've been on this topic before, since every year we're updated with a 'rich list' of European football clubs, and I often ask my students what this means. Everybody understands how financial success and success on the pitch are often (but not always) very closely linked, so it's a question worth asking.
read more...»Elop Stops Paying Dividends as Part of Nokia’s Turnaround Strategy
You might have read that blog entry a recently where we tried to make the case for a business cutting the amounts paid to shareholders in dividends in order to conserve cash and/or invest in projects.
Well it looks like Stephen Elop must read the Business Studies blog (thanks Stephen) because that's exactly what he and the Nokia board have just decided to do!
read more...»Its accrual world. A guide to accrued and prepaid expenses
An accrual is an amount used in an accounting period which will not be paid for until the next accounting period.
In final accounts accrued expenses are: -
- added to the expense (from trial balance) before listing in the Income Statement
- shown as a current liability in the balance sheet
This ensures the Income Statement records costs incurred for the year instead of amounts paid. The expense is adjusted to relate to the period covered by the Income Statement. The balance sheet shows a liability for the amount due but unpaid.
read more...»A defining moment – some of the key terms of introductory accounting explained
These are my top 20 definitions for you to revise based upon the exam papers of the last few years. Each definition is usually worth 2 or possibly 3 marks.
Exam Tip: Remember to apply your knowledge to questions & quote figures, details from the questions or give examples to fully demonstrate your knowledge.
read more...»Make yourself a Balance Sheets butty
Balance Sheets are a key financial statement and learning the layout of these is a key to success in A Level Accounting. They are a snapshot at a point in time. However there is no way you can expect people to remember the layout is there?? Well, - there is and it involves Alchemy (magic).
Assets – things a business owns
– Liabilities things a business owes
= Capital – the owners investment
When you make yourself a sandwich you have bread on the top and bottom to hold the filling in. Being an Accountant I’m a bit odd so I recommend a Current Sandwich! (or a ‘Butty’ to those Tutor2u northerners!)
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How to profit from an Income Statement
Students of Accounting regularly struggle with Income Statements layouts and its vital this is overcome by you as these are fundamental to your success in Units 1, 2 & 3. These can easily be worth 15-25% of the paper. Here are the key components broken down and explained: -
read more...»BUSS3 A* Evaluation - Do You Really Have to Pay That Dividend?
Shareholders can be hard to manage and difficult to please.
On the one hand, a firm owes a debt of gratitude to shareholders for putting their money where their mouth is and backing the business with their cash.
However, shareholders – like all investors – look for a return on their shareholding. The return comes in two ways: (1) a dividend paid (in cash) out of retained profits and (2) an increase in the value of the shares (a “capital gain”).
For many quoted companies, the shareholder dividend is a permanent feature of doing business with investors. A dividend is typically paid twice each year: an interim (usually smaller) dividend paid after 6 months of the financial year; followed by a final dividend once the full results for the year are worked out.
The payment of dividends enables you (and investors) to calculate a key shareholder ratio: the dividend yield.
Dividend yield is simply the annual dividend paid divided by the average share price over the period covered. This gives a good indication of the percentage return on investment that a shareholder gains just from the dividend each year.
So, for example, an annual dividend payment of £0.50 per share for shares that were priced on average at £10.00 each would be a dividend yield of 5%.
So far, so good. But can you see a potential problem from the point of view of management?
read more...»How and why we complete bank reconciliation
Bank reconciliation is where you check that your bank statement (the banks version of your bank account) matches your own cash book (your version of the bank account). Its good practice to do so because: -
- · We can correct errors we make in our cash book
- · We can notify the bank of errors they may have made
- · We can update the cash book with items we have missed
- · We can identify out of date cheques and cancel them in the cash book
- · We can identify dishonoured cheques and update the cash book accordingly
- · We can use it as a deterrent to fraud by comparing our version to the banks independent version
Debit Credit theory – An introduction to double entry bookkeeping
People often switch off when you start talking about double entry book keeping. The real problem is people look at their bank statements and, aside from the pain of having £0.26 sat in there, it’s written from the banks perspective. This means many people think the debit and credit are to be written that way. It’s a fundamental skill needed to do well in many of the accounting units.
Key point to remember
- Double entry means that you do two entries (shock!) – in separate accounts
- Every Account has two sides – a debit side and credit side
- Debit means to receive. The receiving account gets the debit in its account
- Credit means to give. The giving account gets the credit entry in its account
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A Little Ketchup on Source Documents
My first Tutor2u blog will, like most of the others (sadly there will be more!), focus on certain parts of Accounting. There will be regular mention of ‘easy marks’. These are the ones which turn a C grade to a B grade and so on. It’s a theme I use to make sure my students maximise their marks.
This blog is on arguably one of the easiest part of the AS Accounting syllabus. Yet it’s one which students get wrong continually. Source documents are a continual source of frustration to me that students don’t pick up these relatively easy marks.
BUSS3 A* Evaluation - Investment Appraisal and the Power of Application
The need to stay 100% in context when writing BUSS3 answers is well appreciated by A grade students. As we've said many times, good application opens the door to good analysis and pushes student answers up to the highest levels of evaluation.
Nowhere is this more important than in the use of investment appraisal. This is because investment appraisal is all about making forecasts about the future. Those forecasts absolutely have to take account of the nature of the case study firm and the market in which it operates. Investment appraisal calculations also have to make use of data based on assumptions usually made by the case study management. The A* answer for a BUSS3 answer that makes use of investment appraisal evidence should therefore make best use of the opportunity to question the assumptions made by management and the reliability of the forecast data used.
read more...»BUSS3 A* Evaluation - High Gearing is Good – Sometimes!
What is the right level of gearing for a firm? Read many outdated business studies textbooks and they probably warn that gearing is too high if it is over 50% and that such “high gearing” is a warning sign of potential financial problems for a firm.
Well, possibly. But I’ve come across many firms in my business past that have thrived with levels of gearing much higher than 100%. In fact, when you look at most venture capital-backed takeovers or management buy-outs you’ll find that most of the funding used to finance the business is debt. Many well-established multinationals operate with gearing well above 50% and investors hardly bat an eyelid?
So how can high gearing be good for a business?
read more...»Revision Presentation - Cost Basics
This revision presentation looks at the key concepts of business costs. What are the main types of business cost and how can they be categorised? Why is the distinction between variable and fixed costs so important? Why do new businesses often find it hard to estimate the costs of the business - particularly in the startup business plan?
read more...»Revision Presentation - Cash Flow Forecasting for Startups and Small Businesses
Every startup should consider the likely future cash flows of the enterprise in the first few weeks and months of trading. This revision presentation takes students through the basics of the cash flow forecast.
read more...»Revision Presentation - Shareholder Ratios
A brief introduction here to two key ratios that focus on the returns that shareholders earn from their investment - dividend per share and dividend yield.
Revision Presentation - Liquidity Ratios
In this revision presentation we look at liquidity ratios - which assess whether a business has sufficient cash or equivalent current assets to be able to pay its debts as they fall due.
Revision Presentation - Making Investment Decisions (Introduction)
This introductory revision presentation guides students through the concept of basic investment appraisal. It examines the nature of capital investment spending and then outlines three common approaches to investment appraisal: payback period, net present value and accounting rate of return. Some key evaluative points relating to investment appraisal are also discussed.
Revision Presentation - Raising Finance for an Established Business
This revision presentation for business students provides an overview of the finance-raising options for an established business. It covers concepts such as share issues, sale and leaseback, trade credit and venture capital.
Revision Presentation - Financial Efficiency Ratios
In this revision presentation, we provide an overview of financial efficiency rations - which assess how effectively a business is managing its assets.
Revision Presentation - Profitability Ratios
This revision presentation helps guide students through the calculation and interpretation of three key profitability ratios: gross profit margin; operating profit margin and return on capital employed (ROCE)
read more...»Revision Presentation - Balance Sheet Basics
The basic structure and content of a balance sheet is explained in the revision presentation below.
You may also find this revision note on the balance sheet helpful.
Once you've worked through the revision materials on balance sheet basics, have a go at this revision quiz to test your knowledge and understanding.
read more...»Revision Presentation - Income Statement Basics
The revision presentation below outlines the basic structure of the income statement and also explains the meaning of “profit quality”.
You may also find this revision note on the income statement useful.
Once you have worked through the revision note and presentation, try this revision quiz on income statements.
read more...»Hollywood’s return on investment in their Stars
Here’s an amusing one to add to Business Studies end of term competitions. I covered the topic last year and asked which Hollywood celebrities gave the lowest return on the investment studios made in them. In other words, for every $ that the star was paid for appearing in a movie, how much did the film make at the box office? Who is the most ‘overpaid’? Have a few guesses before you look at the list….
read more...»Introducing Zombie Businesses - Trading (Somehow) But Almost Dead
They survive - but only just. They have debts and relatively high gearing, but with the support of creditors and low interest rates these businesses are just about able to service their debts. They are barely profitable and not growing, but they trade on, and on.
Who are they? Zombie businesses. And one view is that zombie businesses are a significant factor in holding back economic growth in the UK.
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Starbucks brews up big tax breaks
Reuters have uncovered some interesting figures relating to Starbuck's UK operation - is it making a profit or not?
read more...»Runaround now!
This energetic revision activity covers knowledge but also removes students from their comfort zones and improves fitness. Warning: clasrooms may not be big enough and please remember health and safety.
ResearchBuster: Retrenchment
Most businesses aim to grow - but not all succeed - and many are forced to reduce the scale and scope of their business activities as a deliberate act of strategy. This is known as “retrenchment” and A2 students should have an understanding of some examples of retrenchment in action. Which firms / brands were involved? What happened? And why? Here are some suggestions that students could add to their notes:
read more...»Sources of Finance- so many to choose from!
This worksheet will hopefully get students thinking about which source of finance is suitable to specific situations
read more...»Will Apple really make £426 profit on each iPhone5?
I love this kind of analysis. It's really done to help inform the investment community who like to get under the skin of the financial performance of public businesses - and there is no bigger business than Apple. But what wonderful material for us business teachers and students too!
read more...»Sources of Finance Flashcards
These flashcards cover all the key sources of finance listed in Edexcel's specification, and include a brief explanation of each one. Ideal for revision or classroom activities.
read more...»More Evidence of Retrenchment as Cost Cutting Bites
Regular readers of the Business Studies blog will have noted the many examples of retrenchment which have arisen in recent years. Students who'd like an introduction to the concept of retrenchment might also find this revision presentation handy.
It pays to look out for examples of retrenchment in the business news because the stories themselves usually provide examples of wider strategic issues being faced by the firms involved. Take these three recent examples I picked up from the news in the last 7 days...
read more...»OCR Standardising its approach to accounts presentation?
A key issue facing businesses teachers is how to introduce students to various types of profit e.g. gross, net, operating, before tax and retained. Until now, I’ve focused on gross net and retained. However, advice just issued by the OCR means a change of tack, from September 2012.
The just published OCR Guidance on Accounting Elements is essential reading for OCR centres. It clarifies how profit and loss accounts (now termed statements of competence of income or income statements), and balance sheets (or statements of financial position) are now laid out.
The document also contains OCR advice on ratios, with a commentary on interpretation particularly helpful.
Sources of Finance for Startups - the Crowdfunding Phenomenon
The banks still refuse to lend. Venture capital (by and large) won’t touch startup finance with a bargepole. So should startups look to source the finance they need from complete strangers? The answer for many might now be yes - through crowdfunding.
Crowdfunding is a fast-growing approach to raising finance for business startups. This BBC article and video provides a great example of crowdfunding in action and also some data on the rise of crowdfunding in the UK.
read more...»Bungle on Business: Cash Flow Forecasting
Hello there, my name is Barry Bungle from Bungles Business Advisory Service.
read more...»Making Finance Fun 2012 - CPD Course
This popular CPD course from the tutor2u team looks at how we can make the teaching and learning of finance fun! There are still a few places left on the next available course - which is in London on Monday 24 September 2012.
read more...»Olympics security: an unprofitable contract
What a shambles! But what a fantastic case study for business teachers and students for years to come!
One year ago, LOCOG proudly endorsed a short video from G4S which trumpeted their role as the security provider for the 2012 London Olympics. The video is shown further below.
One year on, and just days before the Games begin, G4S has admitted that it is unable to meet the requirements of the contract and the Armed Forces have been required to stand in to provide the desired level of security. You couldn’t make it up.
read more...»Adding Value - How Much Profit is Made by the iPhone?
A simply fascinating piece of analysis by the respected Asymco website here which breaks down the costs of each individual element of what goes into an iPhone. Has there ever been a better example of added value to show students - though they may be somewhat surprised by how much contribution is made on each iPhone shipped!
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