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Buisness Basics > Buisness Basics > Flashcards

Buisness Basics Flashcards

1
Q

What is buisiness ?

A

Businesses exist to provide goods and services on a commercial basis to customers

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2
Q

What are some benefits of business to society?

A

They create employment and develop human capital
Drive innovation through r&d and new products
Pay taxes on profits earned
Create wealth by providing ROI

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3
Q

What do businesses do?

A

Business exist to provide goods and services on a commercial basis to customers

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4
Q

What is an entrepreneur

A

People who take the risk to start a business

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5
Q

What is a start-up

A

A start-up is a new business enterprise, formed by one or more entrepreneurs.

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6
Q

Role of an entrepreneur

A

Spots business opportunities
Takes (calculated) risks in order to gain possible future returns
Acts a catalyst for the creation and growth of new business enterprises

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7
Q

The transformation process

A

The transformation process describes what happens inside the business.

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8
Q

Key inputs into the acronym transformation process- CELL

A

Capital
Enterprise
Land
Labour

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9
Q

Added value

A

Selling price - cost of bought in materials, components and services

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10
Q

USP

A

Unique selling point. Firms do this to have a competitive advantage over rivals.
E.g better service, fast lead time ( time from order to delivery e.g Amazon prime), can be anything that gives you an advantage over other competitors in the market.

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11
Q

Small and medium sized enterprises

A

Also known as SMEs
Any business with fewer than 250 employees
There are 5.9 million SMEs in the uk - over 99% of all businesses

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12
Q

Large businesses

A

Over 250 employees,
8000 large businesses
0.1% of all businesses in the uk
Provide lots of employment(39%) and turnover(47%) out of all uk businesses

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13
Q

Industry sectors

A

Primary
Secondary
Tertiary
Quaternary.

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14
Q

Primary

A

Extraction of natural resources

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15
Q

Secondary

A

Involved in manufacturing products with materials provided by primary sector companies

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16
Q

Tertiary

A

Concerned with providing a service
E.g waitrose

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17
Q

Quaternary

A

Business providing information services
E.g ICT (information and communication technologies)

18
Q

B2C

A

Business to consumer
Business sells directly to consumers

19
Q

B2B

A

business sells to business

20
Q

What is a company

A

A company is a separate legal entity to the owner

21
Q

What is a share

A

Part ownership of a business
Most shares are ordinary shares
Each share gives a vote at the agm
Qualify for dividend

22
Q

How do shareholders get their rewards

A

Dividends
Capital growth (buying and selling shares)

23
Q

Dividend yield

A

Shows the % reward for investing in shares
Calculated by : div per share/ share price x100

24
Q

Share price

A

More demand for the share = higher price

Falling share price indicates excess supply

25
Q

Share prices & market capitalization

A

Market capitalization represents the total market value of the issued share capital of the company

26
Q

Market capitalization formula

A

Share price (per share) x number of shares issued

27
Q

Raising finance - share capital

A

Equity finance
Returns in dividends and capital growth
Part of the ownership of a company
Long-term source of finance
Returns tend to be higher but higher risk
Can be repaid

28
Q

Raising finance - debt

A

• Most commonly in the form of loans or overdrafts
• Return: interest on amount loaned and outstanding
• Repaid over an agreed period
• Can be short or long-term
• No participation in the ownership of the company
• Often secured against the assets of the company

29
Q

Cash defined

A

.Cash is money coming in and going out of a business on a day to day basis

.cash is the lifeline of any business and is more important on the short run to pay for e.g stock of groceries and clothing or for wages.

30
Q

Profit defined

A

.profit is equal to total revenue minus total costs, where p= tr-tc

.lower profits have an impact on share price

.a business can trade for many years without profit

.to improve profitability a business must either increase revenue or reduce their costs.

31
Q

The difference between cash and profit

A

Profit:total revenue - total cost in a business, or what is left once all the bills have been paid

Cash: this is money available in the business to pay the bills, cash ,any not come in the same month as it goes out.

32
Q

Trade credit

A

Usually b to b trades
Is an agreement between the buyer and seller that the buyer doesn’t have to pay for an agreed amount of time
Decided by the two companies.

33
Q

Importance of cash to a business

A

To pay suppliers
To pay overheads
To pay employees
To prevent business failure

34
Q

Cash flow

A

The movement of cash into and out of a business

35
Q

Main causes of cash flow problems

A

Low profits or (worse) losses
Too much production capacity
Excess inventory
Allowing customers too much credit & too long to pay
Growing the business too fast (overtrading)
Unexpected changes in the business

36
Q

Too much spending on capacity

A

Spending too much on fixed assets
Made worse if short-term finance is used (e.g overdraft)
Fixed assets are hard to turn back into cash on the short-term

37
Q

Sale & lease back

A

E.g sell shop and lease it from buyer for set amount of time
Gives you the money from sale - money from rent

38
Q

Debt factoring

A

Companies that specialise in getting money out of customers
They buy the debt from the business
Then the relationship only lies between the debt factoring company and the customer.

39
Q

Why produce a Cash flow forecast

A

-Advanced warning of cash shortages
-make sure the business can afford to pay suppliers and employees
-spot problems with customer payments
-as an important part of financial control
-provide reassurance to investors and lenders that the business in being managed properly

40
Q

Minus numbers always put into brackets

A

Buisness Basics (3 decks)

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