Business Spencely Flashcards
What are the 4 functional areas of a business?
Finance,Marketing, Human Resoruces, Operations
What are different words for revenue?
Turnover, sales, sales revenue
What are fixed costs?
Fixed costs stay the same regardless of output
What are some examples of fixed costs?
Rent, salaries, heating and lighting, tax returns
What are variable costs?
Variable costs change in relation to the number of items produced (change with output)
What are examples of variable costs?
Ingredients/business supplies, wages, delivery costs (petrol)
How can profit be increased?
Increasing revenue or decreasing costs
How does cash flow into a business?
Cash sales, payments from debtors, owner ‘s capital (money) invested, sale of assets (things owned), bank loans
How does cash flow out of a business?
Purchasing stock, paying wages, paying debts (bank loans or creditors- people who lend money), purchasing assets
Which industries have particularly long cash cycles?
Seasonal businesses, house building, oil companies, pharmaceutical, growing businesses
Why is cash flow particularly important to banks?
Banks rely on depositors (inflows) in order to be able to lend money
What is the definition of cash flow?
Cash flow refers to the money flowing into and out of a business over a period of time calculated at the exact time it leaves and enters the account
What does profit include?
Profit includes transactions that will lead to cash in and cash out now or in the future
Why might a profitable business be short of cash?
Businesses are holding lots of stock that they are unable to sell at the moment
dividends (rewards to shareholders)
goods are sold on credit (they are not receiving the money immediately)
purchase of fixed assets (big costly items)
What are direct costs?
Direct costs are costs which can be identified directly with the production of a good or service (e.g. raw materials- similar to variable costs)
What are indirect costs?
Indirect costs are costs which cannot be matched against each product because they need to be paid whether or not the production of goods or services takes place (e.g. rent-similar to fixed costs)
What are shareholders?
Owners of a company
What are dividends?
May be paid to shareholders if company makes a profit (profit for the year figure)
What is a budget?
A financial plan for the future concerning the revenues and costs of a business
What is variance?
The difference between a budgeted figure and the actual figure achieved (adverse if worse than expected, favourable if better than expected)
What are the three types of budgets?
Income budget (revenue budget)
Expenditure budget (cost budget)
Profit
What are some purposes of using budgets?
To gain financial support
They motivate staff
To assign responsibility
They improve efficiency
To avoid overspending
To establish priorities
What are the problems of setting budgets?
Managers do not know enough about the division or department
Problems in gathering information
Unforeseen changes
Level of inflation is not easy to predict
Limits maybe imposed
Time consuming
Conflicts between departments
What is inflation?
A rise in the price level