IB Business Management Topic 3.1.1 Role of Finance for Businesses Revision Notes (SL/HL)

IB Business Management Topic 3.1.1 Role of Finance for Businesses Revision Notes (SL/HL) | RevisionDojo

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Capital Expenditure and Revenue Expenditure

Imagine you're running a business.
You have to make decisions about spending money on:
1. Long-term investments, like buying new machinery or building a factory.
2. Day-to-day expenses, such as paying salaries or purchasing raw materials.

Note

These two types of spending are called capital expenditure and revenue expenditure.

Capital Expenditure: Investing in the Future

Definition

Capital Expenditure

Capital expenditure refers to spending on non-current assets that a business will use for a long time.

Capital expenditure refers to spending on non-current assets that a business will use for a long time.
These assets help the business grow, improve efficiency, or increase production capacity.

Note

Non-current assets are resources that provide value over multiple years, such as buildings, machinery, or vehicles.

Example

A new restaurant may need finance to buy kitchen equipment, rent a space, hire chefs and wait staff, and promote its grand opening.

Characteristics of Capital Expenditure

Long-term Use: Assets purchased are used for more than one year.
High Cost: These investments often require significant financial outlays.
Strategic Purpose: Aimed at growth, expansion, or improving competitiveness.

Examples of Capital Expenditure

Purchasing Machinery: A factory buys new equipment to increase production speed.
Building Facilities: A retail chain constructs a new store to reach more customers.
Upgrading Technology: A company invests in a new IT system to enhance data security.

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Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Duis aute irure dolor in reprehenderit

Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Nemo enim ipsam voluptatem quia voluptas sit aspernatur aut odit aut fugit, sed quia consequuntur magni dolores eos qui ratione voluptatem sequi nesciunt. Neque porro quisquam est, qui dolorem ipsum quia dolor sit amet, consectetur, adipisci velit.

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

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Capital Expenditure and Revenue Expenditure

Imagine you're running a business.
You have to make decisions about spending money on:
1. Long-term investments, like buying new machinery or building a factory.
2. Day-to-day expenses, such as paying salaries or purchasing raw materials.

Note

These two types of spending are called capital expenditure and revenue expenditure.

Capital Expenditure: Investing in the Future

Definition

Capital Expenditure

Capital expenditure refers to spending on non-current assets that a business will use for a long time.

Capital expenditure refers to spending on non-current assets that a business will use for a long time.
These assets help the business grow, improve efficiency, or increase production capacity.

Note

Non-current assets are resources that provide value over multiple years, such as buildings, machinery, or vehicles.

Example

A new restaurant may need finance to buy kitchen equipment, rent a space, hire chefs and wait staff, and promote its grand opening.

Characteristics of Capital Expenditure

Long-term Use: Assets purchased are used for more than one year.
High Cost: These investments often require significant financial outlays.
Strategic Purpose: Aimed at growth, expansion, or improving competitiveness.

Examples of Capital Expenditure

Purchasing Machinery: A factory buys new equipment to increase production speed.
Building Facilities: A retail chain constructs a new store to reach more customers.
Upgrading Technology: A company invests in a new IT system to enhance data security.

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

Unit 1: Introduction to Business Management - Core operational components and business functions6 subtopics

Unit 2: HR Management - Motivation, Structure, Hierarchy7 subtopics

Unit 3: Financial Management - Accounting, Ratio evaluation, Core Financial Documents9 subtopics

Unit 4: Marketing Management - The 7 P's, strategies and forecasting6 subtopics

Unit 5: Operations Management - Production Methods, Production planning and management9 subtopics

BM Toolkit - Core business frameworks and tools15 subtopics

IB Business Management 3.1.1 Role of Finance for Businesses Notes

Unit 1: Introduction to Business Management - Core operational components and business functions6 subtopics

Unit 2: HR Management - Motivation, Structure, Hierarchy7 subtopics

Unit 3: Financial Management - Accounting, Ratio evaluation, Core Financial Documents9 subtopics

Unit 4: Marketing Management - The 7 P's, strategies and forecasting6 subtopics

Unit 5: Operations Management - Production Methods, Production planning and management9 subtopics

BM Toolkit - Core business frameworks and tools15 subtopics

Capital Expenditure and Revenue Expenditure

Capital Expenditure: Investing in the Future

Characteristics of Capital Expenditure

Examples of Capital Expenditure

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

Capital Expenditure and Revenue Expenditure

Capital Expenditure: Investing in the Future

Characteristics of Capital Expenditure

Examples of Capital Expenditure

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account