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>
<p>What are <b>cash flow forecasts</b>?</p>
<p>Cash flow forecasts are a business' prediction of how much money will come in and out of the business in a given time</p>
<p>How can a business improve it's cash flow problems?</p>
<ul><li>Rescheduling cash payments</li><li>Reducing cash outflows</li><li>Increasing Cash Inflows</li><li>Overdrafts</li><li>finding new sourceds of finance</li><li>Selling Assets</li></ul>
<p>What are <b>creditors</b>?</p>
<p>Creditors are businesses that loan businesses money</p>
<p>What are some types of short-term sources of finance?</p>
<ul><li>Trade Credit</li><li>Hire Purchases</li><li>Overdraft</li></ul>
<p>What is <b>trade credit</b>?</p>
<p>Trade Credit is when firms pay suppliers at a later date to when they bought the stock</p>
<p>What are <b>Hire Purchases</b>?</p>
<p>Hire Purchases is when a firm buys something but pays in instalments rather than paying for it upfront</p>
<p>What are <b>Overdrafts</b>?</p>
<p>Overdrafts are when the bank allows the business to spend more cash than they currently have in their account</p>
<p>What are some types of long-term sources of finance?</p>
<ul><li>Retained Profit</li><li>Venture Capital</li><li>Crowdfunding</li><li>Loans or Mortgages</li><li>Share Capital</li><li>Personal Savings</li></ul>
<p>What are the 3 main factors that affect what a businesss' objectives are?</p>
<ul><li>Type of Business</li><li>Amount of Competition</li><li>Business Size</li></ul>
