business mocks Flashcards
what is positive cash flow?
When there is more money coming into the business then out
What is negative cash flow?
when there is more business going out of the business then into it
When can businesses experience cash flow problems and why ?
- at start up - large amounts of money need to be invested to get the business started
- During rapid growth-the business is not able to keep up with cash outflows
Define the term ‘overdraft’
These let a firm take out more money out of its bank account than it has paid into it.
Give 2 advantages of using an overdraft
- allows a business to make payments on time
- interest is only paid on what you use
Give two disadvantages of using an overdraft
- higher interest rates( may need to pay back more later)
- the bank can demand full payment at any time
What is trade credit?
The arrangement of the delay or rescheduling of payments to a later date.
Give two advantages of using trade credit.
- gives a small business time to earn the money needed
- no interest charges if terms are met - costs are lower
Give two disadvantages of using trade credit.
- can accumulate interest rates if terms are not met
- can damage relationships with supplier if not paid back on time
What is venture capital?
Money raised through investors willing to take a risk on small businesses
What is share capital?
Share capital is money raised by shareholders through the sale of ordinary shares
Name 2 advantages of share capital.
Share capital is a source of permanent capital (refunds are not allowed).
- There are no dividends to be paid if the business has a poor year
Name 2 disadvantages of share capital
- the business’ founders will slowly lose control
- business is vulnerable to takeover
What is retained profit?
A portion of the companies’ profit that is kept in the business after paying dividends
Give 3 advantages of retained profit
- no repayment needed
- easy access
- does not incur interest charges
Give 2 disadvantages of retained profit
- may upset shareholders that prefer receiving dividends
- not available for future use
what is crowdfunding?
when a large number of people contribute to funding a business idea.
Give 2 advantages and disadvantages of crowdfunding
- It acts as a form of market research
- Provides opportunities for individuals to start a business
dis: - It is difficult to reach the funding target
- The business must interest people and make them want to invest.
Give 3 advantages of market segmentation
- can tailor and offer product ranges that will appeal to a specific demographic
- makes it easier to produce products that meet customer needs
- allows a business to increase market share
Give 2 disadvantages of using market segmentation
- markets and customer needs are always changing
- does not guarantee customers
What is the National Minimum Wage Act? year+ pay
NMW 1998
The lowest hourly rate permitted by the government that an employer can pay to employees 22 and over
- £8.91
Give 3 advantages of increasing NMW
- higher disposable income
- more motivated staff
- better work environment
Give 3 disadvantages to increasing NMW- including not paying it
- increases firms fixed cost and total cost
- if business is unable to they may have to make employees redundant
- paying less than NMW can lead to fines and bad publicity
What year was the consumer rights act established ?
- 2015
What year was the Trade Descriptions Act established and what does it do?
- 1968
- ensures that a business accurately describes their goods and services.
How does the consumer rights act protect its customers?
goods and services should be:
- as described
- of satisfactory quality
- fit for its purpose
What year was the Health and Safety Act established and what does it do ?
- 1974
- makes sure the working environment was safe
Give 3 impacts of following the health and safety legislation
- more productive workforce
- expensive to train staff
- if not followed, firms can be prosecuted or fined and may have to pay compensation
What year was the Equality Act established and what does it do?
- 2010
- prevents discrimination based on gender, age, race etc
Give 3 benefits of meeting legal obligations
- staff are more efficient
- staff more likely to stay working for the business reducing recruitment cost
- the business gains a good reputation
Give 3 impacts of not meeting legal obligations
- pay compensation
- stakeholders and suppliers may be reluctant to be associated with the business
- business’ reputation is damaged
How does levels of interest impact loans?
- high level of interest: more expensive loan: difficult pay back
- low level of interest: cheaper loan: easy pay back
Give three impacts of low interest rates.
- firms and consumers borrow more and save less
- consumers have more money leading to an increase of demand - more profit
- firms may increase output to compensate for higher consumer spending
Give three impacts of high interest rates
- Borrowing money becomes more expensive
- consumers will save more ( TIB ) in order to take advantage of higher returns
- reduced demand for products, less sales
How do levels of interest impact those who save?
high interest rates: better returns - higher reward
low interest rate- lower returns
Give two disadvantages and advantages on focus groups.
adv:
- inexpensive and quick
- see facial expression and body language
dis:
- potential bias due to group influence
- not representative of market ( small group)
define ‘ ethics’
ethics are the moral principles of right and wrong
Discuss the importance of cash to the survival of a small business.
- pay supplier on times
- if not loss of trust
- not allowed to purchase via trade credit
- prevents insolvency
- pay debts
- maintain relationships
give three ways a business can act more ethically
- providing good working conditions
- pay a fair wage
- honest advertisement
give three advantages to acting ethically
- can charge higher prices as consumers place high value on ethical products
- shareholders may be likely to invest
- good relationship with supplier if treated fairly
Give three disadvantages to acting ethically
- higher labour costs due to paying fair wages
- ethically sourced materials are more costly and difficult to find
- increased costs leads to less profit - higher price- deters customers
Give two advantages to acting environmentally friendly
- improve corporate image- attract customers - increase sales
- competitive advantage
Give two disadvantages to acting in an environmentally friendly way
- greenwashing can harm business reputation
- expensive to transition to a eco-friendly business.
Give two ways pressure groups can influence businesses
- raise awareness on a business’ unethical actions
- cause businesses to act more ethically
Give 3 ways firms can be more sustainable and adapt their marketing mix
- use less packaging
- use renewable energy resources
- recycle more and less waste
Give one advantage and disadvantage of having a good brand image.
- products are easily recognised and liked by customers
- can be expensive but can increase revenue
List 3 different types of advertising
- television adverts
- internet adverts
- special offers
Name 1 benefit and drawback to using television adverts as a form of advertising
benefit:
- can be seen by a wide audience
drawback
- very expensive
Name 1 benefit and drawback to using internet adverts as a form of advertising
benefit:
- can be seen by a targeted audience
drawback:
- a lot of adverts online so people may choose to block them
Give two types of sales promotion
- special offers ( discounts)
- product trials
Give one advantage and disadvantage to using sales promotion to advertise
- it should encourage new customers to try a product, boosting sales
- customers may get used to seeing products on promotion and be reluctant to purchase
