2016-2020 Theme 2 Papers Flashcards
Exam Practice on key words and content
Limited Liability
A business owner is only liable for their original investment if the business were to experience a loss
Fixed Cost
Costs that do not change depending on the business’ output
Venture Capital
Investors providing loans and shares to a business in return for capital
Advantages and Disadvantages of Venture Capital
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
Business Plan
A document which details how the business is going to develop overtime
Current Liabilities
Money owed that needs to be paid in a year
Examples of non current Liabilities
Property, Land, Machinery, Vehicles
Working capital
Money needed to pay for business’ day to day tradings (Current Assets - Current Liabilities)
Competitive Market
Many rivals selling similar products
JIT (Just In Time)
Supplies arriving before they are required by stores
Efficiency
The ability to minimise waste and reduce costs of production
Capacity Utilisation
(Current Output / Maximum possible output) x 100
Break Even
The level of output when total total revenue = total costs
Advantages and Disadvantages of Break Even
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
Capital Intensive
Where output of a firm is made using capital goods
Examples of Current Assets
Inventory/Stock, Cash, Trade receivables/Debtors
Interest Rate
Cost of borrowing and reward for saving
Lean Production
Using fewest resources possible in the production process
Sales Revenue
Price x Quantity sold
Total Costs
Fixed costs + Variable cost
Batch Production
Business making more than one item at a time
Crowd Funding
Large number of people providing direct funding to a business (for example, GoFundMe)
Productivity
Output per person / machine per time period
Quality Assurance
Where a product is checked at each stages of the production process
Waste minimisation
Producing goods and services with as few resources as possible
Stock
Items held by the business for future sales or processing (examples, unfinished projects, raw materials)
Flow Production
The making of an item/product at a continuously moving process
Margin Of Safety
Current or planned level of output - break even level of output
Share Capital
Finance raised through shares
Difference between Cash and Profit
Cash takes time to be recorded
Profit is recorded straight away
Buffer Stock
Level of stock that is held for emergencies like surges in demand
Competitive Pricing
Businesses setting prices similar to competitors
Liquidity
How easy it is to turn assets into cash
Internal Finance
Finance raised within a business
Trade Credit
Firm receiving stock from a supplier which doesn’t need to be paid until later
Employee Protection Legislation
Laws that give employees basic workers rights to prevent them from being exploited (for example, minimum wage)
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
Reduce Break even
Use cheaper resources
Less ethically sourced items
Price skimming strategy / Increase prices for low PED
