2.1 - Summary Flashcards
Give three short-term sources of finance
Overdraft
Crowdfunding/Friends & Family
Bank loans
Why is retained profit low risk?
It’s a free source of finance generated from within the business
What types of business can raise share capital?
Ltd and Plc
What are the dangers of unlimited liability?
If the owners can’t pay business debts they could lose personal assets
Explain how two stakeholder groups, other than the owner of the business, may use a business plan
Investors - to assess the risks and rewards of investing
Lenders - to investigate the likely success and risk of lending to a new business
What is the opening balance?
Cash carried forward from a previous trading period
What might a cash-flow forecast be used for?
Determine cash funds the business has at any one time
How is a cash-flow forecast calculated?
(Inflows - outflows = net cash flow) + opening balance = closing balance
What is the net cash flow?
The difference between monthly inflows and monthly outflows
Identify two ways a business can increase cash inflows
Reduce trade credit given to customers
Sell of stock at a discounted price
Identify two ways a business can reduce cash outflows
Delay payments to suppliers
Cutting costs
