Business Finance Flashcards
What is net cash flow
The total cash inflow minus the total cash outflow
What are fixed costs
Costs that do not change with the inflow for example rent
What are variable costs
Costs that change depending with the output for example bills
What is Gross profit
The amount of money earned by selling one unit
What is operating profit
The amount of money left after paying for all the fixed and variable costs
What are Trade debtors
Customers that Owe the business money
What are Debtor days
How long between the customer buying a good and paying for it
What is the cash flow forecast
To predict the future flow of money in and out of a business month by month
What is crowdFunding
Crowdfunding involve the use of Internet and social media as a platform to attract large amounts of investors for example crowd cube
It is suitable for a new idea or to expand the business
Companies put the businesses plans or pitch online and have a set target to raise.
Advantages of crowdfunding
Cheaper and can access large amounts potential investors interest of social media
Disadvantages of crowdfunding
You need social media skills and you are selling ownership of your business
What is profit in absolute terms?
£5000 profit - money wise
What is profit in relative terms?
10% increase in profit
Benefits of having net profit
You can expand your business. And make sure that the total costs are not too high
What are the benefits of gross profit?
You can set the right prices to begin with.
What is the gross profit margin?
The percentage of the profit on the product.
What is Administration expresses?
Operating costs to produce goods that are not directly to the product.
What is limited liability?
The business and the owner are separate. When the business goes bankrupt, the owner will loose what is invested into the business
-eg restaurants, shops. Any business that uses high level of debt.
What is unlimited liability?
The owner and the business are at one. When the business goes bankrupt the owner will loose all personal possessions until the debts are payed off.
- eg painters, Gardner’s, plumbers
What is above the line advertisement?
Marketing using external agencies. For example tv adverts.
+ more mainstream. Can get more attention
- expensive. unnecessary for small businesses.
What is below the line advertisement?
Marketing inside the business. For example, offers, banners, reduction
+ cheap
-not as efficient
How to improve gross profit margin?
better deal with suppliers, increase sales
economies of scale buying in bulk usually means that’s you can negotiate a cheaper price. This leads to lower direct costs therefore increase gross profit
Why do you break even?
Helps the business fine the number of units they need to sell to cover all expenses. After this point the business will make profit.
What is the margin of safety?
The difference between the actual price output and break even.
