How finance and accounting support business decisions

This week’s topics

How finance and accounting support business decisions

1. Starting point: opportunity cost and the cost of borrowing
2. Presenting financial information
3. Producing balance sheets
4. Producing income statements
5. Producing P and L statements

What you will be able to do

• 1.3 Explain how the finance and accounting function supports a business’s decision making.

Activity

Start with this week’s 3 videos, then discuss how they apply to this week’s topic and note one example from a real business.

Study materials

Videos

• What are the implications of borrowing money? · Oak National Academy, Key Stage 3 (lower secondary level) · for registered students
• What Is Opportunity Cost? · YouTube · Marginal Revolution University · 3 min · for registered students
• Opportunity Cost and Tradeoffs · YouTube · Marginal Revolution University · 5 min · for registered students

Further resources

• Principles of Economics 3e, ch. 2.1: Choices, budget constraints and opportunity cost · PDF · OpenStax (2022), section 2.1 on opportunity cost and making choices under scarcity; pp. 28–33 · for registered students
• Contemporary Mathematics, ch. 6.8: The basics of loans · PDF · OpenStax (2023), the cost of borrowing; pp. 630–644 · for registered students
• The Business Finance Guide, The journey and finance options · PDF · ICAEW & British Business Bank (2016), UK guide; pp. 6–29 · for registered students
• Opportunity cost neglect: a meta-analysis · Open-access article · Maguire et al. (2023), Journal of the Economic Science Association. Pulls together 39 experiments showing people often forget what they give up when they choose. · for registered students
• The Economics of Small Business Finance: Equity and Debt in the Financial Growth Cycle · Open-access article · Berger & Udell (1998), Journal of Banking & Finance. Classic map of how firms move from owners' capital to angels, venture capital and bank loans as they grow. · for registered students