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business theme 2 Flashcards

1
Q

name the internal sources of finance

A

retained profit, sale of assets, owners capital (personal savings)

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2
Q

name the external sources of finance

A

overdraft, trade credit, grants, leasing, bank loans, venture capital, share capital, crowd funding

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3
Q

benefits and disadvantages of the internal sources of finance

A

retained profit and perosnal savings are free and do not incur interest !

however shareholders may want some of the profit (dividens and the owner may lose personal investment)

sale of assests frees up the business so they can invest in other things but the business will lose the benefit of the asset

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4
Q

pros and cons of external sources of finance

A

bank loans and overdraft have high interest rates and may need collateral.

share capital and bank loans can raise large amount of finance and sc is only available to ltd and plc

trade credit allows a business to generate revenue before paying suplliers but delays in payments may ruin relationship w suppliers

venture capital can bring expertise into the business but they may try to take control

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5
Q

reasons to start a business

A

enjoy a challenge
be creative
be your own boss
ethical/moral
make profit

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6
Q

advantages of franchising

A

recieve a lump sum of income after the sale,
more promotion with every sale,
economies of sale,
garanteed customers
dont have to be creative

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7
Q

Business objectives

A

profit/sales maxim.
market share
survival
employee welfare
customer satisfaction
social objectives(ethical)

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8
Q

what is an entrepreneur

A

a person who takes the risk to set up a business in hopes of profit and reward.

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9
Q

disadvantages of a partnership

A

share profits,
slow decision making,
conflict

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10
Q

whats the difference between limited liability and unlimited liability?

A

limited liability is when the company and owner are separate legal entities, so they can lose their investment but their personal belongings are safe
unlimited liability can lose personal assets if they dont pay the debts of the business

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11
Q

cash flow forecast calculations

A

inflow - outflow = net cash flow +opening balance = closing balance

e.g february opening balance is januarys closing balance

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12
Q

how do your improve cash flow ? (speed up inflow and slow down outflow)

A

incentivise early repayment e.g give discounts

reduce customer trade credit

sell off stock at low price to free up cash

delay payments to suppliers

increase trade credit with suppliers

cut costs: cheaper supllier alternatives or postpone spending

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13
Q

why do businesses need to follow consumer legislation?

A

fsulty products could lead to a fall in customers, negative reviews/word of mouth, fines which increase costs, customers lost to competitors

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14
Q

following legislation impacts

A

fewer returns and refunds(decrease costs), better brand reputation, higher costs because of high quality raw materials that meets requirements

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15
Q

Why might it be difficult to forecast sales?

A
  • New competitor enters the market - Competitor changes their price
  • Changing consumer incomes
  • Changing fashion and trends
    May over or underestimate sales which could lead to expenses being incorrectly forecasted
  • Suppliers may increase their price which could lead to increased costs
  • The exchange rate may fall which could lead to increased costs of imports
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16
Q

Benefits of cash flow forecast

A

Support an application for lending

Support budgeting process

Identify potential cash flow crisis

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17
Q

limitations of budgeting

A

only as accurate as the data its based on

past doesnt equal the future

unexpected changes in processes

budget cuts can decrease motivation

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18
Q

margin of saftey

A

determines the risk of the business

margin of saftey = current level of output - breakeven point

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19
Q

difference between current assets and non current assets

A

ca = assets the business expects to sell or use withing a year

nca = fixed assets used to operate the business

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20
Q

difference between current liabilities and non current liabilities

A

cl = payments due within a year

ncl = debts the business doesn’t expect to pay with in a year

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21
Q

ways to improve liquidity

A

delay payments

sell off stock

encourage cash sales

gain extra short term finance

22
Q

reasons for business failure

A

internal : poor planning
cash flow
marketing
lack of skills

external: competition
legislation
market conditions
economic factors

23
Q

what does spicee stand for

A

strong
pound
expensive
exports
cheap
imports

24
Q

methods of production

A

job production - one off single units (requests) that require a highly skilled workforce e.g painting

Batch production - standardized components made in batches/small groups

flow production - continuous automated standardized production to achieve economies of scale

25
Q

factors affecting productivity

A

amount of capital
working practices
specialisation
education and training
motivating workers

26
Q

how can a business benefit from improved efficiency

A

unit costs fall

increase profit margins

improved flexibility

charge lower prices - competitive

27
Q

implications of of under capacity utilisation

A

idle resources costing money and not being used

unit costs rise

flexible to changes in demand

28
Q

implications of over capacity utilisation

A

employees overworked and unhappy

mistakes are more likely

unit costs will fall but may rise again due to mistakes from stress

29
Q

what is capacity utilisation?

A

CU is about the use a business makes of its resources

30
Q

what is efficiency ?

A

making the best use of all the resources of a business

an efficient business has minimal waste

31
Q

what is productivity?

A

is the amount of output that can be produced in a given input of resources in a period of time

32
Q

what are the costs of poor stock management

A

tying up cash that cant be used elsewhere

risk of damaged stolen stock

storage costs are high

too little stock means loss of sales and unhappy customers

goods will expire or stop being trendy

can respond to changes in demand

33
Q

what is lean production?

A

lean production involves processes that reduce waste in the operational processes

focused on reducing defects, time wasted and inventory levels

34
Q

ways a business can minimise waste

A

store inventory appropriately e.g perishable goods in the freezer

rotate stock so old stock gets used first

sell off more stock through sales

35
Q

what is the lead time

A

the time taken from when the order was placed to it arriving

36
Q

what is the difference between quality control and quality assurance

A

quality control is about the product whereas quality assurance is about the process

37
Q

outline quality control

A

quality checked at the end

focus on identifying faults

quality control is a specific role

about the product

38
Q

outline quality assurance

A

about the process

all employees are involved

quality is considered at all steps of production

focus is on continual improvement of quality

39
Q

what are the limitations of poor

A

if products need recalling this can be expensive

poor quality = bad brain rep

could get sued

quality costs

40
Q

what is total quality management

A

quality is the priority throughout the organisation and is everyone’s responsibility.

41
Q

outline the 4 stages of the business cycle

A

boom - high rates of economic growth and production

recession - output starts to fall and growth declines

slump - prolonged period of economic decline

recovery - economy starts to pic up after a period of decline

42
Q

features of a boom

A

high profits
low unemployment
high inflation
shortages in supply

43
Q

features of a recession

A

production declines as demand falls

governments use policies to stimulate growth - subsidies

consumer certainty starts to fall

44
Q

features of a slump

A

high unemployment
low interest rates
low spending and investing
business failures and closures

45
Q

features of recovery

A

increasing consumer confidence

business are investing and hiring

spare capacity is used up

46
Q

impacts of deflation on a business

A

businesses may struggle to pay debts because they remain the same whilst their prices decrease

low demand
(people dont purchase as they expect things to get cheaper) may lead to redundancies and less supply

47
Q

impact of competition on business

A

fall in prices leading to lower profit margins

increased costs of promotion

improved efficiency to reduce average costs

increased innovation

48
Q

benefits and limitation of a large market

A

wider consumer base

less volatility than small markets

more regulation and scrutiny

potential international competition

49
Q

pros and cons of a small market

A

less competition opportunities for expansion
easier to build loyal relationships

threat of new entrants
few economies of scale

50
Q
A

as levels (10 decks)

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