2.1

Question 1

owners capital

Answer 1

the amount of money and resources an owner invests into their business for it to succeed

Question 2

retained profit

Answer 2

money kept from profit that will be re-invested into the business

Question 3

sale of assets

Answer 3

the company sells its own belongings to raise funds

Question 4

creditor

Answer 4

lends money

Question 5

debtor

Answer 5

owes money

Question 6

capacity utilisation

Answer 6

decreases the cost per head

Question 7

sources of finance vs method of finance

Answer 7

sources = where the currency comes form
method = what the currency is used for

Question 8

friends and family (source of finance)

Answer 8

Ltd companies can sell shares to F&F to raise funds
A = may not need to be repaid
D = can cause arguments

Question 9

Banks (source of finance)

Answer 9

provides overdrafts or loans
A = can provide large amounts of money
D = need to be repaid with interest

Question 10

Peer to peer funding (sources of finance)

Answer 10

allows institutions to lend money to small businesses
A = quick decisions made about funding
D = need to pay additional fees ontop of interest

Question 11

Business Angels (sources of finance)

Answer 11

‘angel’ investors offer their own disposable income and take shares in return for financing the business
A = doesn’t need repayments and the angel brings experience and knowledge
D = takes longer to find an angel investor

Question 12

Crowd Funding (sources of finance)

Answer 12

large amounts of people make small investments online to fund a project
A = no loan interest costs, don’t need a credit score
D = potential scammers, lots of work

Question 13

Other businesses (sources of finance)

Answer 13

other businesses invest in start-ups
A = high return on investment
D = loss of investments

Question 14

overdrafts (methods of finance)

Answer 14

going past 0 balance
A = quick fix to cash problems
D = affects credit score, will be charged if you exceed the overdraft

Question 15

leasing (methods of finance)

Answer 15

paying per month to use equipment but not buying it
A = lower monthly costs than a loan
D = may pay more to lease than to buy

Question 16

trade credit (methods of finance)

Answer 16

owning the product with a 30/60/90 day period to pay the supplier
A = allows businesses to make a profit before paying
D = trade credit isn’t always available

Question 17

grant (method of finance)

Answer 17

payment given by the government which doesnt need to be paid back
A = keep control of the business
D = only use it for specific reasons

Question 18

limited liability

Answer 18

the owner can only lose how much they invested (protection of personal savings, the owner and the business are separate)

Question 19

unlimited liability

Answer 19

the owner must pay off the businesses debts even if it comes out of their savings

Question 20

debt factoring

Answer 20

when a business sells its account’s receivables to a 3rd party at a discount

Question 21

SMART goals in a business plan

Answer 21

Specific, Measurable, Agreed, Realistic, Timed

Question 22

whats in a business plan?

Answer 22

cash flow forecast, hows liquidity, production cost & suppliers, how the business is financed

Question 23

what is a cash flow forecast

Answer 23

day-to-day running of a business budget and shows where a business will have a short flow of cash