Business Paper 2 Flashcards
what is a debtor
the person owes you money
what is creditor
the people you owe money to
what is a debt factoring company
selloing your debt back to a compay , you may loose some money
what is unlimited liabilities
means that the business owner ot owners are personally responsible for all of the debts of the business
what is a dead of partnership
a document all owners of the business sign
advantages of being a sole trader
you are your own boss
easy to set up
keep all profits
disadvantages of being a sole trader
diificult to take holiday heavy work load may lack the skill required may lack finance ulimited liablity
what is a limited company
company formed when a business is set up to have a sepreate legal identity from its owner
what is a private limited company
can raise funds from investors such as freinds and fmaily but not from the general publkic as shares are not listed
what is a public limited company
£50,000 share capital to come a plc
companies found on the stock exchange
legal requirement to produce an Annual account
what is a business plan
written document that describes a buisiness , its objectvives, stratergies the market it is in and its financial forecast
purpose of a business plan :
provides a focus or the buisness idea
helps focus the business for the purpose that it is set up for
what are all of the external factors:
PESTLE
Political economic social technology legal enviromental
SWOT analysis
Stregnth
Weakness
Oppourtunity
Threats
what should be included in the business plan
idea objectives finance required market overview cash flow forecast
why is cash important to a business
so they can pay their suppliers
pay your employees
re investing the money into the business
what is cash flow
the process of cash flowing in and out of the businesss
what is gross profit
before deductions
what is net profit
after deductions
examples of cash inflow
cash sales sale of spare asset investment of share capital personal funds goverment grats
exaomples of cash outflows
wages suppliers buying equipment loans dividence income tax
what is a cash flow forecast
a table showing predicted opening and closing balances including cash inflows , outflows , net cash flows all over a trading period
why do business need to forecast their sales
bank loans predict profit to see if theyre break even matgin of saftey business plan
what is extrapolartion
uses trends established from historical data to forecast the future
what is an independent variable
the factor that causes the dependent to change
what is the dependent variable
influcenced by independent
key factors affecting sales forecasts
consumer trends
economic variables
competitor
how can business look to increase their sales
usp increase productivity lowering selling price minimising expanding over seas
what is pent up
demand that has been unreahed after a long period of closure
the importances of profit
return of taking a risk
measures the success of an investment
profit is an important source of finance
what are fixed costs
stays the same e.g. rent , salary, insurance
variable costs
can change e.g. wages, new materials
what are oppourtunity costs
the next best option
what are direct costs
expenesses that directly go into producing services
what are indirect costs
general business that keep you operating eg. rent utilities
how do we work out semi variable costs
fixed costs + variable costs = SVC
what is break even
when the businesses costs are equal to the businesses revenue
how to workout break even point
fixed costs / contribution
what is the margin of safety
the difference between the break even point and the current level of outpiut
what is a budget
financial plan for the future concerning the reveneu and costs of a business
what is a sales budget
expected sales over a given time period in terms of both sales quantity and sales value
expidenture budget
expected costs over a period of time
porofit / loss budget
the anticipated difference between sales and expedenture
whatbis zero based budgeting
when costs cannot be justified then no money is allocated in the budget for those costs
what is a profit margin
si the ratio of profit compared to sales reveneu . goves an indication of products profitability
what is a statement of comprehensive income
calculates wether the firm has made a profit or loss by deduction all expresses from sales reveneu
what is a statement of financial posiotion
calculate the networth of a business by balancing what the business owns against what it owes
what is liquidity
a measure of a firms short term survival
what is a acid test
a more sever test of a firms capabilities to meet its debts
current assets - closing inverntory
how to work out debtor days
(trade debtors / revenue ) * 365
how to workout creditor days
(trade payables / cost of sales ) * 365
what is a stake holder
anyone taht is involved in a business
what is a non current asset
made up of fixed costs and intangable assets
what are fixed assets
long term function, used repeatedly by the business and cannot easily be turned into cash
what are intangable assets
these assets have a value but are not physical
how to work out total assets
total non current assets + total current assets
what are liabilities
made up of current liabilities and non current liabilities
what is total equity
total amount of money being utilised in the business
what are diseconomies of scales
when you buy in bulk but the costs still get higher
what is porduction
the process of changing inputs into goods and services
what are the two main methods of production
job production
flow production
what is job production
the method of production where one off specialised products are made for each customer
what is flow production
products are made continuously from one stagr to another also called mass productio
what is kaizen production
an approach to production that aims to acheive chnage from a series of small steps . all workers are encouraged to think continously about ways to improve the product
what is cell production
workers are organised into multi skilled teams , each team is responsible for a particular part of the productip
what is jit
Just In time
stock arrives on the production line just as it is needed this minimises the amount of stock has to be stored
what is stock
represents the raw materials , work in progress and finished goods held by a firm to enable production and meet customer demand
what is capacity
a measure of how output can acheive in a given time periods
what is capacity utilisation
the proportion of a business capacity that is acctully being used over a specific period
capacity utilisation =
( actual level of output / maximum possible level of output ) * 100
utilisation rate =
( number of available hours / total number of available hours ) * 100
what is the ideal capacity utilisation
90%
what is quality
a product or service is of good quality if it meets the needs and expectations of the customers
how to survive in a recession
minimising costs
stimulate demand
production
investment
what are the 4 stages of decision making
prevention
detection
correction
improvesments
what is quality assurance
ensuring qulaity is delivered and maintained atr each stage of the product production process
what is quality control
focuses on identifying faulty goods
what is inflation
sustained increase in the average price level of an economy
how is inflation measured
measured by the annaul percentage change in the level of prices as measured bu the consumer price index
what is CPI
consumer price index ia calculated by tracking the price movements of 650 items
what is legislation
a set of rules and regualtions whith which a business must comply . a constraint on action or a threat
what are the main threats
consumer legislation producers enviroment enviroment employers
main consumer laws
consumer protection act
trade desription act the sale of goods act
main types of competition
price
quality
location
product range
why does competition need to be protected
innovation develope new products providing choice differentiation good quality reasonable