1.3 Putting idea into practice

Question 1

Aims

Answer 1

A general statement of where the business is heading.

Question 2

Objectives

Answer 2

A clear, measureable goal, so success and failure is clear to see.

Question 3

SMART Objectives

Answer 3

Targets that are specific, measureable, achievable, realistic and time-related.

Question 4

Market share

Answer 4

The percentage of a market had by one business.

Question 5

Survival

Answer 5

Keeping a business going, which ultimately depends on determination and cash.

Question 6

Revenue

Answer 6

The total value of sales made within a set period, such as a month.

Question 7

Total costs

Answer 7

All the costs for a set period of time, such as a month.

Question 8

Fixed costs

Answer 8

Costs that do not vary with output, such as rent.

Question 9

Variable costs

Answer 9

Costs that vary as output varies, such as raw materials.

Question 10

Profit

Answer 10

The difference between revenue and total costs; if the figure is negative the business is making a loss.

Question 11

Break even

Answer 11

The level of sales at which total costs are equal to total revenue. At this point neither a profit nor loss will be made.

Question 12

Break even chart

Answer 12

A graph showing a business’ revenue and total costs at possible levels of out.

Question 13

Margin of safety

Answer 13

The amount by which demand can fall before the business starts making losses

Question 14

Cash

Answer 14

The money a business holds in notes and coins, and in its bank accounts

Question 15

Cash flow

Answer 15

The movement of money into and out of the firm’s bank account.

Question 16

Overdraft

Answer 16

The amount of the agreed overdraft that a business uses.

Question 17

Insolvency

Answer 17

When a business lacks the cash to pay its debts.

Question 18

Cash flow forecast

Answer 18

Estimating the likely flows of cash over the coming months and, therefore, the overall state of one’s bank balance.

Question 19

Opening balance

Answer 19

The amount of cash in the bank at the start of the month.

Question 20

Closing balance

Answer 20

The amount of cash in the bank at the start of the month

Question 21

Net cash flow

Answer 21

Cash in minus cash out over the course of a month

Question 22

Negative cash flow

Answer 22

When cash outflows are greater than cash inflows.

Question 23

Crowd funding

Answer 23

Raising capital online from many small investors.

Question 24

Retained profit

Answer 24

Profit kept within the business. The best sort of finance for expansion

Question 25

Share capital

Answer 25

Raising finance by selling part ownership in the business. Shareholders receive a share of the profits.

Question 26

Trade credit

Answer 26

When a supplier provides goods but is willing to wait to be paid. This helps with cash flow.

Question 27

Venture capital

Answer 27

A combination of share capital and loan capital, provided by an investor willing to take a chance on the success of a small to medium size business.