2016-2020 Theme 2 Papers Flashcards

Exam Practice on key words and content

1
Q

Limited Liability

A

A business owner is only liable for their original investment if the business were to experience a loss

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2
Q

Fixed Cost

A

Costs that do not change depending on the business’ output

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3
Q

Venture Capital

A

Investors providing loans and shares to a business in return for capital

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4
Q

Advantages and Disadvantages of Venture Capital

A
ADVANTAGES: 
Large amounts of capital can be raised
No monthly payments required
Easy, flexible Payments
Helps with risk managing

DISADVANTAGES:
Founder ownership reduced
High risk = high interest rate
Loss of profits from venture capitalists

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5
Q

Business Plan

A

A document which details how the business is going to develop overtime

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6
Q

Current Liabilities

A

Money owed that needs to be paid in a year

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7
Q

Examples of non current Liabilities

A

Property, Land, Machinery, Vehicles

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8
Q

Working capital

A

Money needed to pay for business’ day to day tradings (Current Assets - Current Liabilities)

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9
Q

Competitive Market

A

Many rivals selling similar products

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10
Q

JIT (Just In Time)

A

Supplies arriving before they are required by stores

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11
Q

Efficiency

A

The ability to minimise waste and reduce costs of production

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12
Q

Capacity Utilisation

A

(Current Output / Maximum possible output) x 100

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13
Q

Break Even

A

The level of output when total total revenue = total costs

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14
Q

Advantages and Disadvantages of Break Even

A

DISADVANTAGES:
Break even can be unrealistic
They produce more than one product line, meaning their break evens will be different

ADVANTAGES:
Provides a target output
Can be used as a planning tool for the business

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15
Q

Capital Intensive

A

Where output of a firm is made using capital goods

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16
Q

Examples of Current Assets

A

Inventory/Stock, Cash, Trade receivables/Debtors

17
Q

Interest Rate

A

Cost of borrowing and reward for saving

18
Q

Lean Production

A

Using fewest resources possible in the production process

19
Q

Sales Revenue

A

Price x Quantity sold

20
Q

Total Costs

A

Fixed costs + Variable cost

21
Q

Batch Production

A

Business making more than one item at a time

22
Q

Crowd Funding

A

Large number of people providing direct funding to a business (for example, GoFundMe)

23
Q

Productivity

A

Output per person / machine per time period

24
Q

Quality Assurance

A

Where a product is checked at each stages of the production process

25
Waste minimisation
Producing goods and services with as few resources as possible
26
Stock
Items held by the business for future sales or processing (examples, unfinished projects, raw materials)
27
Flow Production
The making of an item/product at a continuously moving process
28
Margin Of Safety
Current or planned level of output - break even level of output
29
Share Capital
Finance raised through shares
30
Difference between Cash and Profit
Cash takes time to be recorded | Profit is recorded straight away
31
Buffer Stock
Level of stock that is held for emergencies like surges in demand
32
Competitive Pricing
Businesses setting prices similar to competitors
33
Liquidity
How easy it is to turn assets into cash
34
Internal Finance
Finance raised within a business
35
Trade Credit
Firm receiving stock from a supplier which doesn't need to be paid until later
36
Employee Protection Legislation
Laws that give employees basic workers rights to prevent them from being exploited (for example, minimum wage)
37
Advantages and Disadvantages of depreciating pound
DISADVANTAGES: £ buys less foreign goods Pay more Consumers ability to purchase reduced due to increasing costs in necessities ADVANTAGES: Debenhams tend to target higher income consumers Debenhams stock may not get a large % from overseas
38
Reduce Break even
Use cheaper resources Less ethically sourced items Price skimming strategy / Increase prices for low PED