1.3 Putting A Business Idea into Practice Flashcards
<p>What is an <b>aim</b>?</p>
<p>An aim is the goals a business wants to achieve in the future</p>
<p>What is an <b>objective</b>?</p>
<p>An objective are the steps a business takes to achieve an aim</p>
<p>How do you calculate <b>revenue</b>?</p>
<p>Revenue = quanitity sold × Selling Price</p>
<p>What is <b>revenue</b>?</p>
<p>Revenue is the income earned by a business from the sale of its goods and services</p>
<p>What are <b>fixed costs</b>?</p>
<p>Fixed costs are costs that do not vary with the output of the business</p>
<p>What are <b>variable costs</b>?</p>
<p>Variable costs are costs that do directly vary with output</p>
<p>Name some examples of fixed costs</p>
<ul><li>Rent</li><li>Insurance</li><li>Salaries</li></ul>
<p>What are examples of variable costs?</p>
<ul><li>Wages</li><li>Raw Materials</li><li>Transportation</li></ul>
<p>How do you calculate total costs?</p>
<p>Total Costs = Fixed Costs + Variable Costs</p>
<p>What is <b>profit</b>?</p>
<p>Profit is the amount of money the business makes, whilst taking costs into account </p>
<p>How do you calculate profits?</p>
<p>Profit = total revenue - total costs</p>
<p>What is a <b>loss</b>?</p>
<p>A loss is when total costs are greater than the total revenue</p>
<p>What is a <b>profit</b>?</p>
<p>A porfit is when total revenue is greater than the total costs</p>
<p>How do you calculate <b>average unit cost</b>?</p>
<p>Average unit cost = total cost / output</p>
<p>What is <b>interest</b>?</p>
<p>Interest is the amount of extra money you pay back from money you have borrowed</p>
<p>What is the <b>break-even point</b>?</p>
<p>The break-even point is when the revenue of a business is equal to the total costs of the business</p>
<p>What is a <b>margin of safety</b>?</p>
<p>Margin of safety is how much output (or predicted output) would have to fall by until the business reached the break-even level of output</p>
<p>The margin of safety is the gap between the actual output and the break-even point</p>
<p>What is <b>cash</b>?</p>
<p>Cash is the money that is readily available to the business</p>
<p>What is <b>cash flow</b>?</p>
<p>Cash flow is the amount of money that is coming in and out of a business and the timings of these cash transfers</p>
<p>What are <b>cash inflows</b>?</p>
<p>Cash Inflows is the money coming into the business</p>
<p>What are <b>cash outflows</b>?</p>
<p>Cash Outflows is the money going out of the business</p>
<p>How do you calculate <b>net cash flows</b>?</p>
<p>Net Cash Flows = Cash inflows - Cash Outflows</p>
<p>What is an <b>Opening Balance</b>?</p>
<p>An Opening Balance is the amount of cash the business begins to trade with</p>
<p>What is a <b>closing balance</b>?</p>
<p>An Closing Balance is the amount of cash the business ends trading with</p>
What are cash flow forecasts?
Cash flow forecasts are a business' prediction of how much money will come in and out of the business in a given time
How can a business improve it's cash flow problems?
- Rescheduling cash payments
- Reducing cash outflows
- Increasing Cash Inflows
- Overdrafts
- finding new sourceds of finance
- Selling Assets
What are creditors?
Creditors are businesses that loan businesses money
What are some types of short-term sources of finance?
- Trade Credit
- Hire Purchases
- Overdraft
What is trade credit?
Trade Credit is when firms pay suppliers at a later date to when they bought the stock
What are Hire Purchases?
Hire Purchases is when a firm buys something but pays in instalments rather than paying for it upfront
What are Overdrafts?
Overdrafts are when the bank allows the business to spend more cash than they currently have in their account
What are some types of long-term sources of finance?
- Retained Profit
- Venture Capital
- Crowdfunding
- Loans or Mortgages
- Share Capital
- Personal Savings
What are the 3 main factors that affect what a businesss' objectives are?
- Type of Business
- Amount of Competition
- Business Size
