business theme 2 Flashcards
1
Q
what are variable costs
A
cost that vary with demand eg cost of supplier
2
Q
what are fixed costs
A
costs that do not change example rent cost on shop
3
Q
sales volume formula
A
sales revenue/sales price
4
Q
total variable cost formula
A
average variable cost x quantity
5
Q
total cost formula
A
varuable cost + fixed costs
6
Q
w
what us break even
A
the point where the business makes neither a loss or a profit
7
Q
what is margin of saftey
A
difference between break even point and actuall sales- shows number of sales that can be lost before making a loss
8
Q
margin of saftey formula
A
actual sales-break even level of sales
9
Q
-good-break even analysis
A
- what if- what happens if prices go up or costs go down
- used to asses when new business stop making a loss
- write busniess plan
10
Q
-bad-bresk even analysis
A
- tell us eveything msde is sold-not always case
- doesnt take into accound discounts eg bulk buy
- only as accurate as data they are based on
11
Q
what is a budget
A
estimate of income or exenditure for a set p-eriod of time
12
Q
4 purpose of budgets
A
-motivqation
communication
forecasting
planning
13
Q
2 types of budgets- historical
zero based budget
A
historical-using current figures and historical performance
zero based- using figures based on potential performance
14
Q
in relation to budgets
what is variance annalysis
A
analysing budget features against what actually happened
-favourable-underspend depsrtmnt -success
-adverse-overspent-reason maye needed more staff
15
Q
limitations of budgeting
A
interdepartment tension as some departments may get better spending
make managers short term
can be difficult to plan ahead
16
Q
profit
A
financial gain from a business through expenditure-income
17
Q
gross profit-formula
A
sales revenue-cost of sales
18
Q
operating profit formula
A
gross profit-expenses
19
Q
net profit formula
A
operating profit-intrest(taxation)
20
Q
what is a profit margin
A
shows how profit compares to sales tos how how well business manage finances
21
Q
gross profit margin %
A
gross profit/sales revenue x100
22
Q
operating profit margin %
A
operating profit/sales x 100
23
Q
net profit margin
net profit margin %
A
net profit/sales x 100
24
Q
ways to improve profitablilty
A
increase revenue
reduce costs
25
whatb is liquidity
ability for a company to turn assets into cash quick
26
how to measure liquidity
using statement of financial position using current and acid test ratio
27
current ratio formula
current assets/current liablities
28
acid test ratio formula
current asssets-inventory/current liabilities
29
hwo to improve liquidity
reduce amounts of stock it holds so finished goods despached faster
reeuce credit period- insist customers pay in 30 days not 90
30
business failure
when a business ceases to trade ina profitable way
31
1 cause of business failure-poor efficiency
use modelzone eg
plan to expand too quickyly opening too many shops but not having sales to sustain it
eg modelzone 2013-closed leaving 13bil debt to loyads bank, opened 15 new stores and could keep up with costs
32
1 cause of business failure- poor marketing
use eg subnny delight
fake marketing saying your product is somehting it is not for eg sunny delight said it ws all natural but it was all artificial damaging childrens health
33
1 cause of business failure-failure to innovate
eg kodak
being unable to adapt to and develop into the modern world
fail to ove fat enough
kodak failed to move fast enough, didnt want to expand into digital maket
staff lower dow hierarchy harf to be listend to
34
1 cause of business failure poor managment of working capital
eg debhenhams
insufficency to manage cash flow
debhenams went into business failure as they didnt have eough working capital to meet day to day expenses
35
extternal cause of business failure-economic recession
customers start to save rather than buy
look for cheaper options
shop in poundland and b and m thrive
36
productivity
output per unit per hour
37
production
total amount of output that is produced in a tim eperiod
38
job production is
when items are made by specialsist
39
job poduction ad and disad
ad-bespoke and unique quality
motivated workers who are passionate
disad-expensive skilled members
wide range of tools
hard to speed up process
40
batch production
make more than one item at a time
41
ad and disad of batc production
ad-meet customers needs and demand
be mechanised less staff needed
can adapt to demand changed
low skiled workers cheaper
disad- small batches mean higher average unit costs
less motivated workers
lower quality
42
flow production
mass markets, keep products flowing through production process eg pizza frozen
43
ad and disad of flow production
ad-large quantities=buy bulk-cheaper
automatic production=improved quality
disad-high cost to buy factory and machinery
low motivated staff due to repetition
44
cell production
production is specalised into certain areas for certain parts eg dc martains
45
ad and disad of cell production
ad-wastage reduces
time waiting for stock to arrive is reduced
more motivation and commitment
disad- any breakdown of macghiney backlog process
needs more certain staff
46
ways to imporove productivity
1. staff training
2. productivityv bonuses
3. new machinery and tech
47
labour intensive
alot of workers
mostly human effort
chin and india eg
nature of product determins if this works
48
capital intensive
focus on machinery and tech
little workers
more common in western countries eg - uk and europe and less in china an india
for car manufacturing
49
capacity utilitaion
how much of a serice or output is being used to maximum capacity
50
eg of capacity utilisation
aeroplane flights-filling flights
if not full capacity make flights cheaper
off peak times deals
51
stock control
control of flow of stock in a business, ordering managing and cmponents of finished goods
52
4 types of stock
raw materials
finished goods
components
work in progress
53
what is buffer stock
stock held incase they is a unforseen rise in demand and problem with supply not all goods can hold buffer stock if its obsolete
54
ad and disad of buffer stock
ad-deal with changes in demand
if supplier cant supplier wont be affected
disad-
cost of storage high
not possible in dynamic market
tie up capital
55
jit
just in time-reduce time between production and deliverey
doesnt keep stock ina warehouse insted they order and deliver same day
56
# d
ad and disad of jit
ad-close relations with supplier
no stock tied up working capital
disad-if supplier dont suplly can be able to supply
cant deal with unforseen surges
deliverys may not be ontime
57
waste
a product or service a customer isnt wiling to pay for
58
waste eg
overproduction
waiting time
excess strock
transportation time
59
lean production
a japanese method of reducting production times adopted by toyota
60
# b
benifitts of lean
* improved customer service
* improved productivity
* reduce waste
61
quality
how well a product or service does what it is designed to do
62
quality control
traditional way of checking work that has already being done and detecting faulty output- very expensive- done at end of production
63
quality assurance
done at every stage of production to minimise chang=ces of output not beng good
if rpoduction is reliable less time on inspection
doing job properly at every stage
more time consuming
64
Total qulaity mamanagment (TQM)
puts quality at heart of eveything
geting it right first everytime
reduce waste and increse quality
kaizen-japan word- improve everything
65
impact of tqm on quality
looks at all aspects such as human resources and production ect to improve process and profits of a business
66
ad and disad of tqm
ad-not paying for inspector
empowered emloyeeds motivated
disad-takes time to intro
staff training expensive
67
kaizen aspects
into small adjustments to production
small changes
responsiblity of every emplyee
68
economic influences
when a business is imoacted anyway by economic factors eg inflation
69
inflation
when goods prices increase ir decrease annually decided by bank of england
70
consumer price index CPI
looks at prices of things we usually spend money on - and see how prices change over time
71
2 options for businesses and iflation
absorb cost or pass onto consumers by increasing prices
72
what doesn it mean when pound strengthend-apprechiation
can buy more forign currency but if deprechiate can buy less currency
73
tax rates
lower=
lower=more demand in economy to pay national bills
74
sole traders pay what tax
income- own at risk
75
larger businesss pay
corporation tax- own is secure
76
what if gov cut spending
people who work on gov prohjects eg school builders will suffer
77
boom
inflation rates low and interest rates low 2%
consumer spending increases
78
recession
falling level of demand
higher interest and inflation
low gov spending
79
slump
bottom of business cycle where consumer spending is lowest
80
# recovery
recovery
demand level for goods and services start to improve interst and inflation goes down
81
legislation
set of laws set by gov and made legal by parliment
82
consumer protection law
right to return if
faulty
unusable
not what averised
83
employee protevtion law
minimum wage
working time
equality
pension
maternity and paternity
84
environment protection law
control pollutnts from a business
## Footnote
controll
85
competion law
cant have companies agreeing to fix price together, to keep wider options
86
health and saftey at work law
corrrecrt equiptment
no dangers
87
