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Business > 2.1 - Raising Finance > Flashcards

2.1 - Raising Finance Flashcards

1
Q

Business cycle

A

A cycle or series of cycles of economic expansion and contraction

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2
Q

Growth (business cycle)

A

A period of improving economic circumstances. Business profits are improving, consumer confidence is improving, jobs created

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3
Q

Boom

A

A period of rapid growth

  • Wealth quickly increases
  • Business profits leap upwards
  • Living standards across the economy make rapid improvements
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4
Q

Recession

A

A period of slow/no economic growth

  • Increased failure
  • Interest rates reduced
  • Lower spending
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5
Q

Interest rates

A

The cost of borrowing money or the return for investing money

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6
Q

Inflation

A

A sustainable increase in the general level of prices for goods/services. Measured as an annual % increase

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7
Q

2 ways government calculates inflation

A
  • consumer price index (CPI)
  • retail price index (RPI)
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8
Q

Causes of inflation

A
  • Demand pull (buyers want more than sellers can produce, so prices rise)
  • Cost push (business costs /wages rise so sellers increase prices to compensate)
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9
Q

Why is some inflation a good thing?

A

Shows that economy is growing, if there is little to no inflation, a sign the economy is weakening

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10
Q

Fiscal policy

A

The use of government mechanisms in revenue collection (taxes)
- Raise direct taxes, leading to a reduction in real disposable income
- The govt can reduce its own spending on public and merit goods or welfare payments

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11
Q

How is inflation controlled

A
  • Fiscal policy
  • Monetary policies
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12
Q

Monetary policies

A

The actions of bank of england to control size and rate of growth

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13
Q

Exchange rates

A

The value of one currency expressed in terms of another

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14
Q

How might changes in exchange rates affect a business

A
  • Increase or lower the price of a product sold abroad
  • Change the price of imported raw materials
  • Change price of competitors’ products may change in the home market
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15
Q

Importers and exporters and how high inflation affects them

A

Importers - businesses that buy goods from overseas

Exporters - Businesses that sell goods overseas

(SPICED)
Strong currency - good for imports, bad for imports

Weak currency - bad for imports, good for exports

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16
Q

What causes exchange rate fluctuations

A
  • Government finances (GDP etc)
  • Interest rate differentials between countries
  • Perceptions of currency traders in the market (political stability etc)
  • Fluctuations in imports/exports
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17
Q

Direct tax

A

Collected by the inland revenue
- Income tax
- Business & corporation tax
- Council tax
- Inheritance tax

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18
Q

Indirect tax

A

Collected by the customs and excise
- VAT
- Fuel duties
- Tobacco duties
- Wine, spirit, beer duties

19
Q

Consumer Protection Law

A

This protects the public by:
- prohibiting the manufacture and supply of unsafe goods
- making the manufacturer or seller of a defective
product responsible for damage it causes
- prohibiting misleading price indications

20
Q

3 basic legal rights consumer has relating to the product

A

if the product is;
- given a misleading description
- of an unsatisfactory quality
- not fit for its intended purpose

21
Q

Unfair Trading Regulations

A

Makes it an offence for a trader to make false or misleading statements about goods/services

If;
- Apply a false trade description to any goods
- Use aggressive door sales techniques

22
Q

Data Protection Act

A

Law that controls use of consumers information
- Businesses must store data securely and avoid any theft or loss
- Prevents consumers details being sold

23
Q

Consumer Rights Act

A

Designed to provide a modern framework for consumer protection.

Regulates that covers goods, services and digital content and protects consumers from unfair trading, even including some regulation on re-selling tickets

24
Q

Statutory rights

A

Legal rights based on laws passed by parliament

25
Q

Contract of employment

A

The agreement made between the employer and the employee

26
Q

Employee legislation

A

Protection from exploitation, such as
- Employment rights act
- Working time regulations act
- national minimum wage act

27
Q

Employee rights act

A
  • Duties and rights of employer and employee
  • Rights to maternity/paternity leave
  • Details about termination of employment
  • Right to written contract within 60 days of starting
  • Details of sunday working
  • Right to written pay slip
28
Q

Working time regulations act

A
  • Limit of av 48 hours
  • Right to 11 hours rest daily
  • Right to day off weekly
  • If working 6+ hours, right to break
  • Right to 4 weeks paid leave per year
29
Q

National minimum wage act

A

Statutory right to be paid a certain amount of remuneration for work performed

30
Q

Health & Safety at work act

A
  • Aims to raise standard of safety and health for all individuals at work and to protect public whose safety may be put at risk by activities of people at work
  • Places responsibility on employers and employees
30
Q

Competition act

A
  • Prevents collusion - price fixing
  • Addresses anti-competitive agreements
  • Addresses abuse of dominant market position
31
Q

Environment protection act

A
  • Introduced system of integrated control for disposal of waste to land water and air
  • Duty to recycle and face criminal penalties if fail to co-operate
  • Applies to waste and control of emissions
  • Duty of care when dealing with waste, including IT
32
Q

Uncertainty

A

A future that we have little to no knowledge of including potential outcomes or riskd.

33
Q

How might uncertainty impact spending?

A
  • Can affect spending decisions if uncertainty around economic conditions
  • In takeover, staff uncertain about pay
  • Households with uncertainty may save more
  • Consumer may delay large purchase
34
Q

How to combat uncertainty around exchange rate fluctuations

A

Foreign exchange can be bought and sold in advance (‘forward’ market)

35
Q

How to combat uncertainty around interest rate fluctuations

A

May take out long term loan at fixed rate of interest

36
Q

4 types of competition

A
  • Perfect competition
  • Monopolistic competition
  • Oligopoly
  • Monopoly
36
Q

How to reduce uncertainty

A
  • Research (provides info)
  • Contracts (makes prices predictable for period of time)
  • Diversification (spreads risk)
37
Q

Perfect competition

A

Many competitors offering the same product

Intense competition and competitors have to accept the same price

38
Q

Monopolistic competition

A

Many small firms offering differentiated products. Each firm has a small market share.

E.g. restaurants and small local businesses

39
Q

Oligopoly

A

Dominated by small number of firms.
Often use non-price strategies to compete (branding etc)
Potentially anti competitive if collusion on price occurs

40
Q

Monopoly

A

Only one provider for service/goods.
They control price and level of output in market.
Heavily regulated (usually) to protect customers

41
Q

Difference between monopolistic competition and oligopoly

A
  • Monopolistic = many sellers offer differentiated products (differ slightly but serve similar purpose). Due to this sellers exert some control of price
  • Oligopoly = few sellers supply sizable portion of products in the market
42
Q

Competition from other businesses will impact on decision making in terms of …?

A
  • Nature of ownership
  • Nature of product or service sold
  • Product range offered
  • Pricing policies
  • Marketing methods

Business (20 decks)

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