Business growth and decline Flashcards
Acquisition
When one business takes control of another business by purchasing a controlling interest in it
Bankruptcy
A declaration that a business or person is unable to pay his or her debts
Business life cycle
Refers to the stages of growth and development a business can experience
Cash flow
The money coming into the business in the form of cash receipts, and the money leaving the business as cash payments
Creditors
Those people or business who are owed money
Diversification(or conglomerate integration)
When a business acquires or merges with a business in a completely unrelated industry
Horizontal integration
When a business aquires or merges with anther business that makes and sells similar products
Insolvent
When a company is not able to pay its debts as and when they fall due
Involuntary cessation
When the owner is forced to cease trading by the creditors of the business
Liquidation
When an independent and suitably qualified person - the liquidator- is appointed to take control of the business with the intention of selling all the company’s assets in an orderly and fair way in order to pay the creditors
Merger
When the owners of two separate businesses agree to combine their resources and form a new organisation
Realisation
The process of converting the assets of a business into cash
Receivership
When a business has a receiver take charge of the affairs of the business. Unlike liquidation, the business may not nessarily be wound up
Vertical integration
When a business expands at different but related levels in the production and marketing of a product
Voluntary administration
When an independent administrator is appointed to operate the business in the hope of trading out of present financial problems
Voluntary cessation
When the owner ceases to operate the business of their own accord
What is the correct order of the business life cycle phases?
A.Establishment, growth, prematurity, maturity
B.Establishment, growth, maturity, post-maturity
C.Establishment, growth, prematurity, post-maturity
D.Establishment, pregrowth, growth, prematurity, maturity
B.Establishment, growth, maturity, post-maturity
Patrick Ng has started a new Korean restaurant. It is a partnership with his brother. What would be the financial management issues most likely to be faced by this business in its establishment phase?
A.Constantly increasing profits and cash-flow
B.High fixed costs and low cash-flow
C.Increasing profitability and variable costs
D.Limited liability and increasing profitability
Could be B
To what type of business does the term ‘bankruptcy’ apply?
A.Private company
B.Government business enterprise
C.Partnership
D.Public company
C. Partnership
What does the term ‘insolvency’ mean?
A.Lack of profitability
B.Too much debt owed by the business
C.Inability to repay debts
D.Poor sales revenue
C. Inability to repay debts
Which of the following characteristics best describes the establishment stage of a business.
A.Low costs, low sales, little, profit
B.High costs, little profits, low sales
C.Low sales, large market share, high profit levels
D.High sales, small market, large scale production
c or d obviously
Complacency among management usually occurs in which stage of the business life cycle?
A.Establishment
B.Growth
C.Maturity
D.Post-maturity
D.Post-maturity
In response to an increase on competition, management of the restaurant has decided to expand the business. They have opted for a horizontal integration strategy. What is meant by this strategy?
A.The business merges with a totally unrelated business
B.The business creates a supply chain with a supplier
C.The business merges marketing and operations functions.
D.The business merges with another business making a similar product
D.The business merges with another business making a similar product
In a sole trader or partnership, what is the process of converting the assets of a business into cash known as?
A. Realisation
B.Bankruptcy
C.Liquidation
D.Voluntary admininistration
C.Liquidation
