Business Theme 2

Question 1

Examples of internal finance

Answer 1

-owners capital
-retained profit
-sale of assets

Question 2

Examples of external finance

Answer 2

-family and friends
-banks
-p2p lending
-business angles
-crowd funding
-venture capital

Question 3

Advs of internal f

Answer 3

-capital available immediately
-cheap - no interested
-not subject to credit checks
-no involvement of 3rd parties

Question 4

Disadvs of internal f

Answer 4

-can be limited
-inflexible - limited sources
-can cause conflict - shareholders vs managers

Question 5

Unlimited liability (internal finances)

Answer 5

where there is no legal difference between the owners and the business (incorporated)

Question 6

Limited liability (external)

Answer 6

business has a legal identity separate from the owners

Question 7

ordinary shares

Answer 7

no guaranteed dividends, have voting rights

Question 8

preference shares

Answer 8

received fixed rate of return when dividends declared

Question 9

deferred shares

Answer 9

held by founders of company - receive after ordinary shares have been paid a min amount

Question 10

Significance of business plans

Answer 10

-helps maintain fin
-structured assessment of opportunies and risk
- analysis of the competitive pos
-provides benchmark or progress to be made

Question 11

Cashflow forecast uses

Answer 11

1.)identifying the timing of cash shortages + surpluses
2.)supporting applications for finances
3.)enhancing the planning process
4.) monitoring cashflow

Question 12

cash flow forecasts limitations

Answer 12

1.)info based on estimates
2.) doesn’t plan for sudden external; forces beyond owner’s control
3.)time-consuming

Question 13

profit

Answer 13

difference between total revenue - total costs

Question 14

cashflow

Answer 14

difference between total cash inflow and outflow

Question 15

where cashflow differs from profit

Answer 15

1.) time differences
2.)non current assets are accounted for

Question 16

Sales forecasting

Answer 16

is a business process, assessing the probable outcome using assumptions about the future

Question 17

Factors affecting sales forecasting

Answer 17

1.)consumer trends
2.)seasonal variations
3.)fashion
4.)long-term trends

Question 18

Break Even analysis - advs

Answer 18

1.)helps management + finance provides (better understand the viability + risk)
2.)recognition of costs
3.) estimated BE (amount of output to sell to cover costs)

Question 19

Break Even analysis - disadvs

Answer 19

1.)unrealistic assumptions (products not sold at the same price at different levels of output)
2.) sales aren’t the same as output
3.) planning aid rather than decision making tool

Question 20

Budgets

Answer 20

a financial plan for the future concerning the revenues + costs of a business

Question 21

uses of a business plan

Answer 21

1.)estimation priorities + set targets
2.) turn objectives into reality
3.)improve efficiency
4.) control income + expenditure
5.)monitor performance

Question 22

difficulties of a business plan

Answer 22

1.) not real figures
2.) demotivate staff (unachievable)
3.) manipulation - easy targets to seem successful
4.)rigidly - different views
5.)short-termism - actions to undermine targets

Question 23

types of budgets

Answer 23

1.)historical
2.)zero based

Question 24

Income statement

Answer 24

-measures business’ performance (1y)
-compares income of the business over cost of goods

Question 25

working capital

Answer 25

current assets - current liabilities

Question 26

Internal causes of business failure

Answer 26

-lack of planning
-cashflow problems (overtrading, allowing too much credit, over borrowing)
-lack of funds
-failure to innovate
-marketing probs
-poor leadership

Question 27

External causes of finance

Answer 27

-competition
-changes in legislation
-changes in consumer taste
-economic conditions

Question 28

job production

Answer 28

-single product at a time
-small scale work
-labour intensive

Question 29

batch production

Answer 29

-batch of 1st product then move onto the next
-workers usually specialise in one product
-unit costs lower if output is high

Question 30

flow production

Answer 30

-organised that different operations can be carried out after another
-also called mass production
-low unit costs - e.o.s

Question 31

ways of improving productivity

Answer 31

-training
-improved motivation
-more capital equipment
-better quality materials

Question 32

ways of improving utilisation

Answer 32

-reduce capacity
-increase sales
-increase usage

Question 33

quality management

Answer 33

control - inspecting the finished goods for flaws and removing
assurance - a step by step process so that defects don’t happen

Question 34

stock control

Answer 34

buffer stock - emergency stock (in case of shortages) not to miss demand
JIT - improves cashflow, reduces waste (obsolete+damaged stock) tho - lot of faith in suppliers

Question 35

economic influences

Answer 35

-inflation(rising prices, uncertainty and confidence falls + int rates)
-deflation (GPL falls, might cause fall in demand as customers wait for lower prices
-exchange rates (competitiveness)

Question 36

consumer legislation impact

Answer 36

-increase in costs
-quality control
-dealing with customer complaints
-changes in business practice

Question 37

employee protection

Answer 37

-employee contract
-discrimination
-unfair dismissal
-equal pay