SQA National 5 Business Management Unit 3 Management of People and Finance

What Unit 3 actually demands

Management of People and Finance is about how a business manages its two most important resources: its staff and its money. The SQA tests describe and explain knowledge of human resources, and confident handling of the finance calculations. This guide walks through both parts of the unit, then sets out how it is examined. Each topic has a matching dot-point page with worked questions; this overview ties them together.

People

The People part covers recruitment and selection (the stages of recruitment, internal versus external recruitment, and selection methods such as interviews, testing and references), training (induction, on-the-job and off-the-job and its benefits), motivation (financial methods such as bonuses and commission, and non-financial methods such as praise, promotion and responsibility) and employment legislation (health and safety, equality and minimum wage law).

Finance

The Finance part is the calculation-heavy half. It covers the sources of finance (overdraft, trade credit, bank loan, hire purchase, leasing, mortgage, share capital, owner's funds, retained profit and grants), costs and break-even (fixed, variable and total costs, the break-even point using contribution, the break-even chart and the margin of safety), cash budgeting (interpreting receipts, payments, net cash flow and the closing balance, and solving cash flow problems), financial statements (the income statement, gross profit, profit for the year and the profit margins) and the use of technology in finance.

The key calculations

Three calculations recur in the question paper and must be confident:

• Break-even: contribution per unit $=$ selling price $-$ variable cost; break-even point $=$ fixed costs $\div$ contribution per unit; margin of safety $=$ actual sales $-$ break-even sales.
• Cash budget: net cash flow $=$ receipts $-$ payments; closing balance $=$ opening balance $+$ net cash flow (carried forward each month).
• Profit: gross profit $=$ sales $-$ cost of goods sold; profit for the year $=$ gross profit $-$ expenses; margins $=$ profit $\div$ sales $\times 100$.

How Unit 3 is examined

A typical SQA profile for this unit:

• Describe and explain on people. Recruitment stages, training methods, motivation and legislation reward described and explained answers.
• Calculations on finance. Break-even, cash budgets and profit must be worked accurately, with the method shown for method marks.
• Interpretation and recommendation. Reading a cash budget, judging a margin, or recommending a source of finance rewards a justified response, not just a figure.

Check your knowledge

A mix of recall and calculation questions covering Unit 3. Attempt them, then check against the solutions.

1. Name the three main methods of training. (1 mark)
2. State the formula for the break-even point. (1 mark)
3. A product sells for $\pounds 25$, variable cost $\pounds 15$, fixed costs $\pounds 5000$. Find the break-even point. (2 marks)
4. A month has opening balance $\pounds 600$, receipts $\pounds 4000$, payments $\pounds 4500$. Find the closing balance. (2 marks)
5. Sales are $\pounds 60000$ and cost of goods sold is $\pounds 36000$. Find the gross profit. (1 mark)