1. BTEC Extended Diploma in
Business
Interpretation of ratios
How to determine the financial
health of an organisation
BTEC Extended Diploma - Unit 5 - 1
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2. Learning outcomes:
• By the end of this lesson you must be able
to:-
• Describe how to record transactions,
monitor activity, control management of
the business (planning, monitoring,
controlling)
• Measurement of financial performance
(gross profit, net profit, value owed to and
by the business)
• Categorise Capital income: sole traders;
partners; shares;SharronDiploma mortgages
loans; - Unit 5 -
BTEC Extended
Holding
2

3. BTEC Extended Diploma - Unit 5 - 3
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4. Record Transactions
• Work in pairs
• Using the cards provided match up the
- activity
- purpose
- and suggest the person responsible for the
activity
Take 10 minutes
BTEC Extended Diploma - Unit 5 - 4
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5. Fill in the missing words
• Work individually – take max. 10 minutes
• Compare your answers with your
neighbour
• Check – are you right?
BTEC Extended Diploma - Unit 5 - 5
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6. Measurement of financial
performance
• Financial records allow a business to
identify if they are making a profit or loss.
• Profit is identified as GROSS PROFIT or
NET PROFIT
ACTIVITY
BTEC Extended Diploma - Unit 5 - 6
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7. Money matters – what is the
difference between the
following?
• Value owed to the business
• Value owed by the business
BTEC Extended Diploma - Unit 5 - 7
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8. What happens if money is going
out at a higher pace than the
money coming in?
BTEC Extended Diploma - Unit 5 - 8
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9. Reminder – you are expected
to:
• Be able to examine a specific type of
organisation and identify the likely income
and revenue and indicating in each case
whether it is of a capital or revenue
nature. You must also be able to describe
clearly what each category means.
BTEC Extended Diploma - Unit 5 - 9
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10. Capital income
• Capital income is the money invested by
the owners or other investors that is used
to set up a business or buy additional
equipment
Research
time
BTEC Extended Diploma - Unit 5 - 10
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11. Revenue Income
• Revenue is income that a company
receives from its normal business
activities, usually from the sale of goods
and services to customers
a.k.a turnover
BTEC Extended Diploma - Unit 5 - 11
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12. Revenue Income
• Some companies receive revenue from
interest, dividends or royalties paid to
them by other companies
BTEC Extended Diploma - Unit 5 - 12
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13. What is Capital expenditure?
• Capital expenditures (CAPEX or capex)
are expenditures creating future benefits,
capex is incurred when a business spends
money either to buy fixed assets or to add
to the value of an existing fixed asset with
a useful life extending beyond the taxable
year. CAPEX is used by a company to
acquire or upgrade physical assets such
as equipment, property, or industrial
buildings BTEC Extended Diploma - Unit 5 - 13
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14. Capital expenditure
• fixed assets (land and buildings; office
equipment; machinery; furniture and
fittings; motor vehicles); intangibles, eg
goodwill, patents, trademarks
BTEC Extended Diploma - Unit 5 - 14
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15. Freddies Frames
BTEC Extended Diploma - Unit 5 - 15
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16. A-Z
• Working individually begin a dictionary A-Z
of accounting words together with a
definition (covered so far) – you will
improve on your dictionary week by week
so consider the presentation and quality of
your work.
• Now work in pairs to share your results
BTEC Extended Diploma - Unit 5 - 16
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17. Lesson Outcomes
BTEC Extended Diploma - Unit 5 - 17
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