business Flashcards
internal sources
Retained profit-retaining profit for later investment
adv-no interest
dis-shareholders may want in dividends
Owners capital-money owner invests into business
adv-does not need paying back
dis-limited deedning on perosnal wealth of owner
Selling assets-old machinery is sold to generrlise capital
adv-no interest
dis-no longer own asset
may be time consuing to sell asset and get the cash
external cources of finance
banks
freinds and family
other businesses
peer to peer lending
crowd funding
freinds and family
adv-no interest
dis-limited and may put strain on relationship if not paid back in time
banks
offer loans, overdrafts and mortages
adv-recognised finanical instititon
terms and conditions are clear
can advice business
dis-strict lending criteria
peer to peer lenders
operate online
alow individuals to lend money to businesses
lender says how mich willing to lend and borrowers say how much wanting to borrow
assess how risky by lending compay and then match them with appropriate lenders
business angels
wealthy indiivuals who invest in business they see as potentially being successful
adv-may have buisness contacts and lots of business knowledge
dis-have a share of business, so they may gain some control of business and its decisions
crowd funding
done on webstie
put details onto webiste
company put up business idea and people invest money if like idea
people then get discounts,upon releaset etc
adv-raises aawareness, increases sales
dis-reputation may be damaged if business idea fails
risk of idea being copied
short term methods of finance
Grants-fixed sum paid by government
adv-no need to pay back
no interst
no share of business given up
dis-applicatio process can be time consuming and difficult to get
Loans-
Overdrafts-where bank allows business to have negative amount in bank account
Trade credit
business plan
outline what a business wants to achive and how
good plan contains a business overview, aims and objectives, marketing and sales stregy, finanical forecasts, cash flow forecasts,
adv of business plan
helps convice potential investors that everything has been well thought through and low risks of business failing
shows how profitable business expects to be and whe si investors know when they could start getting returns on their investment
what are cash flow ofrecasts
show cash inflows(sums of money recived by business)
cash outflows(paid out by business)
what is working capital
amount a business has for day to day spending
adv of cash flow forecasts
show amount of money that managers expect to flow into busienss adn flow out over period of time
makes sure enough cash around to pay suppliers and employees
can preict when will run out of cash adn can provide loan in time
makes banks and venture capitalist see they done their resratch and idea of where business going to be in future
dis of cash flow forecasts
needs lots of experience and research
if dyanmic makret, hard to make accurate cash flow forecast as costs can constnatly go up and down
net cash flow
cash inflows-cash outflows
closing balance
opening balance plus net cash flow
sales forecasts
predict future sales volume and revenue based on past sales data
what are the 3 things sales forecasting helps a business make decsions about
finance-important to generate accurate cash flow forecasts
what are the 3 factors affecting sales forecasting
consumer trends-sometimes fairly predictbale e.g more fairy lights in christmas but sometimes more uncertain
economic variables-e.g interest rates, inflation rates, unemployment leveles
people have less money then less liekly to spend as much
actions of comeptitors-e.g coemptior decides to decrease their prices or launch a new product, oredicted sales may decrease
(also hard for dynamic markets as external factors affecting sales are constantly changing
what is sales volume
number f untis sold in period of time
sales revenue
value of sales in given time period
sales revenue calcualtion
selling price times sales volume
what are fixed costs
DONT chnage with output e.g rent, business rates, basic salaries
what are variable costs
costs that do change with output e.g e.g packaging costs, wages, raw material costs