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Business Studies > B6 - Finance > Flashcards

B6 - Finance Flashcards

1
Q

What is retained profit?

A

Profit that’s been earnt by a business in the previous year

Its been retained by the business

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2
Q

What is New Share Issue?

A

Where a business releases new shares for people to buy into the business

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3
Q

What is a loan?

A

An amount of money borrowed from a bank or other lender

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4
Q

What is a mortgage?

A

A longer term loan that’s used to buy a property

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5
Q

What is an Overdraft?

A

A short term lending of smaller amounts of money, may be organised by the bank

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6
Q

Whta is Trade Credit?

A

Where a business pays suppliers at a later date - buy now, pay later

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7
Q

What is Hire Purchase?

A

When a business pays for something in installments

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8
Q

What is a government grant?

A

A sum of money awarded to a business from the government that doesn’t have to be paid back

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9
Q

What is Cash Flow?

A

Movements of cash in and out the business

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10
Q

What is Cash Inflow?

A

Cash into the business appears at the top of the cash flow forecasl

This is called Income

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11
Q

What is Cash outflow?

A

Cash that’s being spent in the business.

This is known as expenditure

This will be on bill such as wages and advertising

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12
Q

What are solutions to cash flow problems?

A
  • Overdrafts
  • Reducing cash outflow
  • Increasing cash inflow
  • Re-schedullimg payments
  • Finding new sources of finance
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13
Q

What is the formula for Net Cashflow?

A

Cash Inflows - Cash Outflows

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14
Q

What are fixed costs?

A

Costs that don’t vary with the level of output in a business

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15
Q

What are some examples of fixed costs?

A
  • Rent

- Salaries of Managers

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16
Q

What are Variable Costs?

A

Costs that vary with the level of trade

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17
Q

What is the formula for Total Costs?

A

Total Costs = Fixed Costs + Variable Costs

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18
Q

What is the formula for Sales revenue?

A

Sales revenue = price of product x quantity of product

19
Q

What is the formula for Profit?

A

Profit = Total Revenue - Total Costs

20
Q

What is Average Rate of Return?

A

The annual percentage profit that an investment makes compared to the cost of the investment

21
Q

What is the formula to calculate Average Rate of Return?

A

( Average annual profit / initial capital outlay ) X 100

22
Q

What is Break-Even?

A

The point where a business is no longer making a profit or a loss

23
Q

What are the uses of Break Even

A
  • Used to write a business plan
  • Used as a ‘ what if tool ‘ to work out what happens if price goes up
  • Used by start ups to work out when they’ll stop making a loss
24
Q

What is Margin of Safety?

A

The difference between the actual level of output and the breakeven output.

25
Q

How do you calculate margin of safety?

A

Actual Output - Breakeven Output

26
Q

What does the Margin of Safety show?

A

How many units less you can make before you start making a loss

27
Q

What are Financial Statements?

A

Written records that convey the business activties and the financial performance of a business

28
Q

What are the 3 Finacial Statements

A
  • Income Statement
  • Statement of Financial Position
  • Cashflow Statement
29
Q

What are 3 examples of Internal Stakeholders?

A
  • Owners
  • Managers
  • Employees
30
Q

What is Gross Profit?

A

Profit after deducting costs of Sales

31
Q

What is the formula for Gross Profit?

A

GP = Sales Revenue - Cost of Sales

32
Q

What is Gross Profit Margin?

A

A financial measure used to asses a Business’ finacial health and business model

33
Q

What is the formula for Gross Profit Margin?

A

( Gross Profit / Sales Revenue ) X 100

34
Q

What is Net Profit?

A

The money left after paying all your bills?

35
Q

What is the Formula for Net Profit?

A

NP = Operating Profit - Interest

36
Q

What is Net Profit Margin.

A

Helps a Business measure how well they’re controlling their expenses

37
Q

What is the Formula for Net Profit Margin?

A

( Net Profit / Sales Revenue ) X 100

38
Q

What is Economies of Scale?

A

when Average cost FALLS as output GROWS

39
Q

What is Diseconomies of Scale?

A

Once Economies of Scale have been reached if the output grows, the average cost per unit INCREASING

40
Q

What is Outsourcing?

A

Getting another business to provide the service for you

41
Q

What are 4 examples of Outsourcing

A
  • Production : some car manufactures may oursource some parts
  • Payroll
  • Delivery
  • Purchasing
42
Q

What are reasons to DisEconomies of Scale occuring

A
  • Business has too many employees

- Employees become less motivated

43
Q

What are benefits of a business franchising out?

A
  • Speeds up growth : franchisee pay billss
  • Less HR costs : employees
  • Less operational costs : franchisee deals with it
44
Q

What are cons of a business franchising out?

A
  • Reduced Control

- Profit sharing

Business Studies (5 decks)

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