In this unit you will study the purpose and importance of personal and business finance. You will also develop the skills and knowledge needed to understand, analyse and prepare financial information.
Mapped Specification
Here you can find a collection of resources that can be used with the BTEC National Level 3 in Business qualification.
In this unit you willl sit a 2 hour written exam in this unit. The paper will be marked out of 100 with 2 sections. Section A contains questions on the personal finance unit content and approximately one-third of the marks, and Section B contains questions on the business finance unit content and approximately two-thirds of the marks.
Download a Student Self Assessment Check List (.pdf document)
Unit Content
| Learning Aim | Content | Video / Assessment Resources |
| A1 - Function and Role of Money | The ability to handle money received, and to control money paid, is a fundamental requirement for personal and business success. This success relies on understanding what ‘money’ is. • Functions of money: o unit of account o means of exchange o store of value o legal tender. • Role of money is affected and influenced by a number of factors: o personal attitudes towards risk and reward, borrowing, spending and saving o life stages (childhood, adolescence, young adult, middle age, old age), key features of each stage, financial needs and implications at each stage o culture, including religious and ethical beliefs o life events can vary the personal life cycle from individual to individual o external influences/trends and the financial-related effects o interest rates, cost of borrowing versus reward of saving. • Planning expenditure, common principles to be considered in planning personal finances: o to avoid getting into debt o to control costs o avoid legal action and/or repossession o remain solvent o maintain a good credit rating o avoid bankruptcy o to manage money to fund purchases o generate income and savings o set financial targets and goals o provide insurance against loss or illness o counter the effects of inflation. | |
| A2 - Different Ways to Pay | The use of money as a payment method, advantages and disadvantages of: • cash • debit card • credit card • cheque • electronic transfer • direct debit • standing order • pre-paid cards • contactless cards • charge cards • store cards • mobile banking • Banker’s Automated Clearing Services (BACS) Faster Payments Service (FPS) • Clearing House Automated Payment System (CHAPS). | Different Ways to Pay Video |
| A3 - Current Accounts | Different types, features, advantages and disadvantages, different services offered: • standard • packaged, premium • basic • student. | Current Accounts Video |
| A4 - Managing Personal Finance | Suitability of different financial products and services against individual needs. • Different types of borrowing, features, advantages and disadvantages: o overdraft o personal loans o hire purchase o mortgages o credit cards o payday loans • Different types of saving and investment features, advantages and disadvantages: o individual savings accounts (ISAs) o deposit and savings accounts o premium bonds o bonds and gilts o shares o pensions. • Risks and rewards of saving versus investment. • Different types of insurance products, features, advantages and disadvantages: o car o home and contents o life assurance and insurance o travel o pet o health |
Differnet Types of Borrowing Video Different Types of Investment Video Different Types of Insurance Video Different Types of Insurance Student Worksheet (Word Document) |
| B1 - Features of Financial Insitutions | Types of organisations and their advantages and disadvantages: • Bank of England • banks • building societies • credit unions • National Savings and investments • insurance companies • pension companies • pawnbrokers • payday loans. | Features of Financial Insitutions Video |
| B2 - Communicating with Customers | Methods of interacting with customers, advantages and disadvantages: • branch • online banking • telephone banking • mobile banking • postal banking |
Communicating With Customers Video PPI Watchdog Report (YouTube Video) |
| B3 - Consumer Protection in relation to personal finance | Function, role and responsibilities of: • Financial Conduct Authority (FCA) • Financial Ombudsmen Service (FOS) • Financial Services Compensation Scheme (FSCS) • legislation – consumer credit. | Consumer Protection in Relation to Personal Finance Video |
| B4 - Information, guidance and advice | Function, role and responsibilities, advantages and disadvantages of: • Citizens Advice • independent financial advisor (IFA) • price comparison websites • debt counsellors • Individual Voluntary Arrangements (IVAs) • bankruptcy. | |
| C1 - Purpose of Accounting | Recording transactions. • Management of business (planning, monitoring and controlling). • Compliance (preventing fraud, compliance with law and regulations). • Measuring performance. • Control – assisting with the prevention of fraud, trade receivables and trade payables. |
Purpose of Accounts Worksheet (PDF Document) |
| C2 - Types of Income | Capital income: o loan o mortgages o shares o owner’s capital o debentures. • Revenue income: o cash sales o credit sales o rent received o commission received o interest received o discount received |
Types of Income and Expenditure Worksheet (Word Document) |
| C3 -Types of Expenditure | Capital expenditure: o non-current assets – tangible (land, buildings and premises, machinery and equipment, vehicles, fixtures and fittings) o intangible (goodwill, patents, trademarks, brand names). • Revenue expenditure: o inventory o rent o rates o heating and lighting o water o insurance o administration o telephone o postage o stationery o salaries o wages o marketing o bank charges o interest paid o straight-line depreciation o reducing balance depreciation o discount allowed. |
Capital and Revenue Expenditure Video Calculating Depreciation Straight Line Method Video Calculating Depreciation Reducing Balance Method Video Types of Income and Expenditure Worksheet (Word Document) Depreciation Explained Help Sheet (PDF Document) Depreciation Questions Worksheet (PDF Document) |
| D1 - Sources of Finance | Advantages, disadvantages, short term and long term: • internal: o retained profit o net current assets o sale of assets • external: o owner’s capital o loans o crowd-funding o mortgages o venture capital o debt factoring o hire purchase o leasing o trade credit o grants o donations o peer to peer lending o invoice discounting | Sources of Finance Worksheet (PDF Document) |
| E1 - Cash Flow Forecasts | Inflows/receipts: o cash sales o credit sales o loans o capital introduced o sale of assets o bank interest received. • Outflows/payments: o cash purchases o credit purchases o rent o rates o salaries o wages o utilities o purchase of assets o Value Added Tax (VAT) o bank interest paid. • Prepare, complete, analyse, revise and evaluate cash flow. • Use of cash flow forecasts for planning, monitoring, control, target setting. • Benefits and limitations of cash flow forecasts. |
Cash Flow Forecasting Worksheet Cash Flow Forecasting Explained Video 1 Cash Flow Forecasting Explained Video 2 Constructing a Cash Flow Forecast Video |
| E2 - Break Even Analysis | Costs: o variable o semi-variable o fixed o total. • Sales: o total revenue o total sales o selling price per unit o sales in value and/or units. • Calculation using/manipulating, break-even formula (units and/or sales value), completion of break-even chart, break-even point. • Identification of area of profit, area of loss. • Identify and calculate margin of safety (units and value). • Calculation of total contribution, contribution per unit benefits and limitations. • Use of break-even for planning, monitoring, control, target setting. • Prepare, complete, analyse, revise and evaluate break-eve |
Break Even Explained (YouTube Video) Break Even Tutorial (YouTube Video) Break Even Basics (YouTube Video) Rearranging Break Even Formula (YouTube Video) Calculating Break Even Video 1 (YouTube Video) Calculating an Average to Use with Break Even Video 2 (YouTube Video) Rearranging Break Even Formula Video 3 (YouTube Video) |
| F1 - Statement of Comprehensive Income | • Purpose and use. • Completion, calculation and amendment to include gross profit (revenue, opening inventories, purchases, closing inventories, cost of goods sold), calculation of profit/loss for the year (expenses, other income). • Adjustments for depreciation (straight-line and reducing balance). • Adjustments for prepayments, accruals. • Interpretation, analysis and evaluation of statements. |
Income Statement Video (Introduction) Income Statement Level 3 Video Accruals and Pre-Payments Explained (Video) Income Statement Interactive Worksheet Income Statement Interactive Worksheet (Answers) Accruals and Pre-Payments Worksheet 1
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| F2 - Statement of Financial Position | Purpose and use. • Completion, calculation and amendment of statement using vertical presentation to include: o non-current assets (tangible and intangible, cost, depreciation and amortisation, net book value) o current assets (inventories, trade receivables, prepayments, bank, cash) o current liabilities (bank overdraft, accruals, trade payables) o net current assets/liabilities o non-current liabilities (bank loan and mortgage) o net assets o capital (opening capital, transfer of profit or loss, drawings, closing capital). • Adjustments for straight line (cost x%), depreciation, reducing balance (cost – depreciation to date x%). • Adjustments for prepayments, accruals. • Interpretation, analysis, and evaluation of statements |
Statement of Financial Position Key Terms Introduction to Statement of Financial Position Video |
| F3 - Measuring Profitability | Calculation, interpretation, analysis and evaluation of: • gross profit margin: (gross profit/revenue) × 100 • mark-up: (gross profit/cost of sales) × 100 • profit margin: (profit/revenue) × 100 • return on capital employed (ROCE): (profit/capital employed) × 100 |
Tesco Annual Report (.pdf Document) Sainsburys Annual Report (.pdf Document) Morrisons Annual Report (.pdf Document) Marks & Spencer Annual Report (.pdf Document) Calculating Gross Profit Margin Quiz Calculating Net Profit Margin Quiz |
| F4 - Measuring Liquidity | Calculation, interpretation, analysis and evaluation of: • current ratio: current assets/current liabilities • liquid capital ratio: (current assets – inventory)/current liabilities |
Calculating Current Ratio Quiz Calculating Liquid Capital Ratio Quiz Example Profitability and Liquidity Exam Question Example Answer for Profitability and Liquidity Exam Question |
| F5 - Measuring Efficiency | Calculation, interpretation, analysis and evaluation of: • trade receivable days: (trade receivable/credit sales) × 365 • trade payable days: (trade payables/credit purchases) × 365 • inventory turnover: (average inventory/cost of sales) × 365 |
Financial Efficiency Ratio Quiz |
| F6 - Limitations of Ratios | • Limitations of ratios when assessing business performance. |