2.1/2.2

Question 1

Collateral

Answer 1

Something of value that is used as security when a loan is offered. In the event of the business being unable to pay the loan back, the asset is transferred to the bank and sold in order to generate the money due for repayment

Question 2

Venture capital

Answer 2

A method of providing finance in higher risk investments through a combination of loans and shares

Question 3

Overdraft

Answer 3

A facility offered by a bank to allow a customer to continue spending money even when their bank account becomes negative. There will be an agreed limit.

Question 4

Leasing

Answer 4

An alternative to buying an asset outright. Instead the asset is leased for a monthly fee for a set period of time

Question 5

Trade Credit

Answer 5

Goods or services provided by a supplier that are not paid for immediately

Question 6

Business Angel

Answer 6

Individuals who invest in the early stages of business, taking a significant equity share

Question 7

Crowdfunding

Answer 7

Obtaining external finance from small investments, usually through web-based appeal for investors.

Question 8

Liquidation

Answer 8

When a company’s owners close down the company, selling off its assets to generate cash to pay off the debts of the business

Question 9

Business plan

Answer 9

A document setting out a business idea and how it will be financed, marketed and put into practise

Question 10

Share capital

Answer 10

Business finance that has no guarantee of repayment or of annual income but gains a share of the control of the business and its potential profits

Question 11

Creditors

Answer 11

Those owed money by a business- for example suppliers and banker

Question 12

Bankrupt

Answer 12

When an individual is unable to meet personal liabilities, some or all of which can be a consequence of business activities

Question 13

Limited liability

Answer 13

Owners are not liable for debts of the business; they can lose no more than the sum they invested

Question 14

Unlimited liability

Answer 14

Owners are liable for any debts of the business, even if this requires them to sell all their assets and possessions and become personally bankrupt

Question 15

public limited company

Answer 15

A company with limited liability and share which are available to the public. It’s shares can be quoted on the stock market

Question 16

Contingency plans

Answer 16

Plans held on reserve in case things go wrong

Question 17

Real incomes

Answer 17

Changes in household incomes after allowing for changes in prices

Question 18

Sales forecast

Answer 18

A method of predicting sales using statistical methods

Question 19

Trend

Answer 19

The general path that a series of values follows over a period of time

Question 20

Fixed costs

Answer 20

Costs that do not change with output

Question 21

Variable costs

Answer 21

Costs that do change with output

Question 22

Sales revenue

Answer 22

The number of units sold in a time period multiplied by the average selling price

Question 23

Sales volume

Answer 23

The number of units sold in a time period

Question 24

Total costs

Answer 24

All of the costs producing a specific output level- e.g fixed costs + variable costs

Question 25

Break-even chart

Answer 25

A line graph showing total revenue, total costs, fixed and variable costs

Question 26

Total Contribution

Answer 26

total revenue less total variable costs

Question 27

Break even level of output

Answer 27

Fixed costs/ Contribution per unit

Question 28

Contribution per unit

Answer 28

Selling price- variable costs per unit

Question 29

Margin of safety

Answer 29

Sales volume- break even output

Question 30

Total contribution

Answer 30

Contribution per unit x unit sales

Question 31

Adverse variance

Answer 31

a difference between budgets and actual figures that’s boosts a firms profit

Question 32

Expenditure budget

Answer 32

Setting a maximum figure on what a department or manager can spend over a period time

Question 33

Favourable variance

Answer 33

A difference between budgets and actual figures that boosts a firm’s profits

Question 34

Income budget

Answer 34

Setting a minimum figure for the revenue generated by the product department or manager

Question 35

Zero-budgeting

Answer 35

Setting all future budgets to £0 to force managers to justify the spending levels they say they need for the future.

Question 36

Historical budgeting

Answer 36

Basing future budgets on the past, historical figures.

Question 37

Owners capital

Answer 37

Money the owner invest into the business, often from personal savings.

Question 38

Selling assets

Answer 38

Businesses can sell some of their assets to generate capital

Question 39

Retained profit

Answer 39

Profit can be retained and built up over the years for later investment.

Question 40

Family and friends

Answer 40

Small or new businesses may ask family or friends to help out financially

Question 41

Banks

Answer 41

Offer loans, overdrafts or mortgages

Question 42

Peer-to-peer lending

Answer 42

Companies that operate online e.g Zopa
allow individuals to lend money to other individuals or businesses

Question 43

List three reasons as to why Conor is the goat

Answer 43

Huge
Jacked
Hilarious
Massive chopper

Question 44

who do you look up to like a god

Answer 44

Finny Sui Sui sui

Question 45

Cash flow forecast

Answer 45

Shows the amount of money that is expected to flow into the business and out in a period of time

Question 46

adv of cash flow forecasts

Answer 46

-established firms can base of past experience- improves accuracy
-Ensures all debt can be paid to suppliers and fund wages
-Included in business plan- helps get loans from banks or venture capitalists
-Ensures firms aren’t holding onto too much cash

Question 47

Dis adv of cash flow forecasts

Answer 47

-Good accuracy needs experience and research- new business may struggle
-Some businesses operate in dynamic markets where it is hard to predict cash flows and inflows (hinders accuracy)
- this can end up the business running out of money if forecast is inaccurate

Question 48

sales volume (eq)

Answer 48

sales revenue / selling price

Question 49

Break even point (def)

Answer 49

level of sales needed to cover costs

Question 50

Break even (eq)

Answer 50

total fixed costs / contribution per unit

Question 51

adv of break even analysis

Answer 51

• easy to do
  -Quick to interpret the break even output so have ability to cut costs quickly-saving costs
  -helps persuade banks for loans
  -influences decision of a new product should be launched as can calculate how may sales it will take to break even

Question 52

dis adv of break even analysis

Answer 52

• assumes variable costs rise- can get discounts from suppliers
  -only focuses on one product
  -data inaccurate then results are wrong -Does not tell you how much you will sell

Question 53

Budgeting

Answer 53

A financial plan for the future

Question 54

profit budget (eq)

Answer 54

Income budget- expenditure budget

Question 55

adv of budgeting

Answer 55

• motivating (sets targets)
  -gains control of income and expenditure
  -communication tool to see where money is being spent
  -helps attract investors as shows potential of business

Question 56

dis adv of budgeting

Answer 56

• departments competing for funding can cause rivalry
  -Can be restrictive, stops business from adapting
  -time consuming (opportunity cost)
  -external influences can be hard to predict e.g inflation
  -

Question 57

variance (def)

Answer 57

means the business of performing better or worse than budgeted

Question 58

variance (eq)

Answer 58

actual figure - budgeted figure