1.3 Putting A Business Idea Into Practice Flashcards
What is a business aim?
What the business wants to achieve in the long term
What is a business objective?
A more specific aim for a business
Sales revenue calculation
Selling price x Quantity sold
Break even calculation
Fixed costs / (price per unit - variable costs per unit)
Contribution calculation
Price per unit - variable costs per unit
Margin of safety calculation
Sales outputs - break even output
What are total receipts?
All inflows
What is the opening balance?
Closing balance of previous month
What is net cash flow calculation?
Total receipts - total payments
What is closing balance calculation?
Net cash flow + opening balance
What is the calculation for % interest on loans
(Total amount repaid - amount borrowed ) / amount borrowed x 100
What is an example of a non financial business aim?
No animal testing, customer satisfaction, personal challenge, independence
What is an example of a financial business aim?
Business survival, maximise profit, growth, increase dividends to shareholders
Examples of fixed costs of a business
Rent, rates, utility bills, salaries
Examples of variable costs of a business
Raw materials , packaging, delivery costs
Break even chart - profit
Break even chart - loss
Break even chart- break even point
Break even chart - margin of safety
What are the uses of cash to a business?
Pay supplier, employees and overheads
Definition of cash
The money a business holds in notes and coins in its bank account
Cash-flow définition
The movement of money in and out of a business
Insolvency definition
What a business lacks the cash to pay its debts
When will a business need finance?
During start up and initial costs
During periods of expansion
When cash flow is poor
What are some examples of short term finance
Overdraft
Venture capital
Trade credit
Personal savings
Retained profit
Share capital
Loan
Crowdfunding
What is an overdraft
When your bank account goes into negative
What are the benefits and drawbacks of an overdraft
B: flexible, you can take at any time
D: high interest
What is trade credit
Buying goods and paying for them later
What is crowdfunding?
Raising capital online form investors
What is retained profit?
Profit kept by the business from previous years
What is venture capitals
A combination of share and loan capital provided by an investor willing to take a risk
What is a mortgage?
A type of loan that is secured on a property. Interest can be fixed or variable
What is a loan
Borrowing an amount of money from the bank which is paid back in monthly instalments at a fixed rate of interest
What is dividends?
The part of the profit that is paid to shareholders as a reward for their investment
What is share capital?
The investment raised from selling shares to investors
What is interest?
The charge on borrowing money
What are the benefits and drawbacks of trade credit
B: helps cash flow, free
D: might not be granted (risky)
What are the benefits and drawbacks of personal savings
B:no interest to repay
D: might not have enough, you won’t get it back
What are the benefits and drawbacks of retained profit?
B: no interest
D: a new business will not have it
What are the benefits and drawbacks of venture capital
B: advice and support provided
D: have to share profit
What are the benefits and drawbacks of share capital
B: no need to repay
D: have to share profit cz of dividends
What are the benefits and drawbacks of a loan
B: helps cash flow with fixed monthly payements
D: interest , may not be granted, time consuming
What are the benefits and drawbacks of crowdfunding
B: risk is shared w people
D: may not raise enough
