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NSSCAS Business Studies (8245) study materials
NSSCAS Business Studies (8245) study resources

NSSCAS Business Studies (8245): Finance, accounting and financial decision-making

NSSCAS Business Studies (8245) · Work through your exam, one topic at a time.

All guide sections

Finance, accounting and financial decision-making

Domain overview

Finance, accounting and financial decision-making tests how businesses raise, record, control and evaluate money. Expect questions on sources of finance, cash flow, break-even, budgets and simple ratios, with decisions judged against risk, cost and liquidity.

Core rules and concepts

  • Internal finance includes retained profit and sale of assets; external finance includes bank loans, overdrafts, trade credit, leasing, shares and venture capital. Match the source to purpose and duration: short-term needs suit overdrafts; machinery may suit a long-term loan or lease.
  • Profit is revenue minus costs; cash flow is money in and out. A profitable business can fail if customers pay late.
  • Working capital = current assets − current liabilities. It funds day-to-day operations.
  • Break-even output = fixed costs ÷ contribution per unit, where contribution = selling price − variable cost per unit.
  • Accounting statements include the income statement and statement of financial position. Ratios assess liquidity, profitability and gearing; investment appraisal includes payback, average rate of return and NPV.

Worked example

A small manufacturer has fixed costs of N$120,000 a year, a selling price of N$50 and variable cost of N$30 per unit. Contribution is N$20. Break-even is N$120,000 ÷ N$20 = 6,000 units. At forecast sales of 8,000 units, margin of safety is 2,000 units. If the bank loan needed for equipment raises fixed costs to N$150,000, break-even becomes 7,500 units. The decision depends on whether demand can exceed 7,500 units with a reasonable cushion, not just on the loan's interest rate.

Traps that cost marks

Do not use total costs instead of fixed costs in break-even. Profit is not cash. A higher gross profit margin does not guarantee better liquidity. Gearing measures debt in the capital structure; high gearing raises financial risk. Payback ignores cash flows after the payback date and the time value of money. Always state units and show the contribution calculation.