Business Planning Flashcards
What is a business plan?
A document that outlines future business plans and strategies to turn an idea into a successful business.
What are the main purposes of business planning?
To help set up a new business, raise finance, set objectives, and organize business functions.
How does a business plan help raise finance?
It persuades lenders and investors by showing potential profits, cash flow forecasts, and growth strategies.
What are the main sections of a business plan?
Goals, pricing, market research, customers, competitors, location, promotion, and finance.
What is the role of financial forecasting in a business plan?
It helps estimate revenue, costs, profit, and loss to guide decision-making and attract investment.
What are the benefits of business planning?
Defines the business idea, helps plan for the future, shows if the idea is realistic, and attracts funding.
What are some drawbacks of business planning?
It can cause “paralysis by analysis,” may not adapt to market changes, and is ineffective if not executed properly.
What are fixed costs (FC)?
Costs that do not change with production levels, such as rent, salaries, and insurance.
What are variable costs (VC)?
Costs that change with production levels, such as raw materials and direct labor.
How is total cost calculated?
Total Cost = Fixed Costs + Variable Costs
What is sales revenue (SR)?
The total money a business earns from selling goods or services.
What is the formula for sales revenue?
Revenue = Price per unit × Quantity sold
How is gross profit (GP) calculated?
Gross Profit = Sales Revenue - Variable Costs
How is net profit (NP) calculated?
Net Profit = Sales Revenue - (Fixed Costs + Variable Costs)
What happens when a business makes a loss?
The total costs are higher than the revenue, meaning the business is not making enough money to cover expenses.
