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Business Theme 2 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What are circumstances which may lead to a business to raise finance

A

Starting up, growing, problem with the cash flow problem, financing extra materials needed when a large order is received

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2
Q

Give me some examples of internal finance

A

Owners Capital, personal savings, retained profits, sale of assets 

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3
Q

Retained profit definition

A

Profit kept within the company for reinvestment

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4
Q

External sources of finance

A

Family and friends, banks, Peer-to-peer, business, angels, crowdfunding, other businesses

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5
Q

What is crowdfunding?

A

This is a method of raising capital through small contributions from a large number of individuals

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6
Q

What is peer-to-peer funding?

A

This funding involves individuals lending money directly to Others or businesses through online platforms

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7
Q

Methods of finance

A

Loans, share, capital, venture, capital, overdraft, leasing, trade credit, grants

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8
Q

What is venture capital

A

Start-up firms giving big percent of company for loans to people, so they don’t need to go to the bank and pay a high interest rate on the loan

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9
Q

What is overdrafts?

A

The ability to be able to spend more even when your account is in negative

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10
Q

What is unlimited liability?

A

Sole trader, partnership

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11
Q

What is limited liability?

A

Private limited company, public limited company

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12
Q

How old is soul traders/partnership business is likely to use the sources for finance

A

Owner, capital, bank, finance, leasing, trade credits 

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13
Q

What always private and public limited companies used to source the finance

A

Share, capital, bank, finance, angel, or venture, capital, investments, peer-to-peer, funding, or crowdfunding, leasing, trade credit

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14
Q

What is a business plan?

A

A business plan is a document, setting out a business idea, and how it will be finance, marketed and put into practice

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15
Q

What are the main sections to focus on one making a business plan?

A

Exclutive summary, The product or service, the market, marketing, planning, operational plan, financial plan, conclusion

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16
Q

What does the cash inflows show

A

All cash inflows shows the places and timing from which cash flows into the business

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17
Q

What does cash outflow show?

A

Shows how much cash leaves the business each month

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18
Q

Monthly balance

A

This is also called net cash flow. This shows the net affect for the month on cash flow.

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19
Q

Opening Balance

A

Shows how much the business had at the beginning of the month

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20
Q

Closing balance

A

Shows how much the business has had at the end of the month

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21
Q

What are the main things to look out/consider when receiving a cash flow forecast?

A

Your closing balance and monthly balance

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22
Q

Uses of cash flow

A

This is the spot cash problems advance, so that action can be taken in time to prevent a major crisis

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23
Q

Limitations of cash flow forecast

A

The smaller amount of quantitive data used in the forecast, less it can predict, Boris could sway the forecast, forecast are just guesses 

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24
Q

Factors affecting sales forecast

A

Consumer trends, economic variables, actions of competitors

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25
Q

Deficiencies of sales forecasting

A

Sales forecasting doesn’t adapt to trends

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26
Q

What are fixed costs?

A

Six calls do not change in proportion to output. Examples include heating, lighting, interest rates.

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27
Q

What are variable cost

A

Variable costs, are costs that change in direct proportion to the level of output. Examples of variable costs include raw, materials, packaging.

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28
Q

What are total cost?

A

Total cost is adding variable and fixed costs together

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29
Q

What does the break even calculate?

A

The breakeven calculates, how much must be sold before the business can start making a profit

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30
Q

What is the formula for breakeven?

A

Break even equals fixed cost divided by selling price minus variable cost per unit

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31
Q

What is income budget?

A

Set a target for the value of sales to be achieved

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32
Q

What is expenditure budget?

A

Department  cost must stay under X amount

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33
Q

What is historical budget?

A

Using last year’s budget as a guide and making some obvious change

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34
Q

What is the zero-based budget?

A

They get their employees to set their own realistic budget

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35
Q

What is profit?

A

Profit is the difference between the revenue of the business and the cost generated by the business during a period of time

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36
Q

What is gross profit and how do you calculate it?

A

Gross profit equals total revenue minus cost of sales.

Gross profit, which deduct the cost of sales from total revenue 

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37
Q

What is operating profit and how do you calculate it?

A

Fixed overheads are deducted from gross profit to calculating operating profit, fixed overheads of things which need to be paid like salaries, rent

Operating profit equals gross profit minus fix overheads 

38
Q

What is profit for the year/net profit and how do you calculate it?

A

This is all your revenue minus loans not paid

Profit for the year equals operating profit minus net financing, costs and corporation tax

39
Q

Ways to improve profit

A

Increase revenue, reduce costs, do a combination of the two

40
Q

What is the statement of comprehensive income?

A

This is a document produced by the public limited companies that shows revenue, a breakdown of different types of costs and different types of profit for a year

41
Q

 How do you calculate the current ratio?

A

Current ratio equals current assets divided by current liabilities

42
Q

What is the ideal ratio for current ratio?

A

1:5:1

43
Q

Formula for the acid test ratio

A

Acid test ratio equals total current assets minus stock divided by current liabilities

44
Q

What is the ideal ratio for the acid test ratio?

A

1:1

45
Q

How to improve liquidity

A

Selling underused assets, Raising more share capital, Increase in long-term boring through loans, Postponing the planned investment 

46
Q

Why do some businesses fail?

A

Not really understanding consumers, failure to differentiate from rivals, Failing to communicate, what is special about the product or service to consumers , Poor leadership, not being able to find enough ways to generate revenue 

47
Q

Internal causes of business failure

A

Marketing failure, Financial failure, system or operation failure

48
Q

External causes of business failure

A

Changes in tech, new competition, economic, change, behavioural of banks

49
Q

Methods of production, What is job production? 

A

Involves medicine one-off items to suit each customer individual requirements

50
Q

Methods of production, What is batch production? 

A

Makes a group of products, the one specific at a time, allowing some variation in products yet some Specialisation 

51
Q

Methods of production, what is Flow production?

A

This allows huge volumes of output to be produced extremely quickly and cost effectively, It is likely to rely heavily on automation

52
Q

Methods of production, What is cell production?

A

This involves organising workers into small groups or cells that can produce a range of different products more quickly than job production allows

53
Q

What is productivity and what is its formula?

A

Productivity is a measure of efficiency

Productivity equals total output divided by numbers of workers

54
Q

Factors influencing productivity

A

Quality and age of machinery, skills, and experience of workers, level of employee motivation

55
Q

What does labour intensive production mean?

A

This means that a production process relies heavily on human input with a little use of automation

56
Q

What is capital intensive production?

A

This means it uses a high level of automation reducing the role of humans as much as possible, replacing them with machines

57
Q

Capital intensive production issues

A

Initial cost will be high, Running costs will be relatively low, it may offer little flexibility in terms of production variations

58
Q

Labour intensive production issues

A

Labour costs will form a higher proportion of total costs, to say the product is made handmade means that you can modify it more, and sell it for more

59
Q

Formula for capacity utilisation

A

Capacity utilisation equals current account divided by maximum possible output x100

60
Q

Ways to improve capacity utilisation

A

Increased current output, reduce maximum capacity

61
Q

Reasons for keeping both of stocks of raw materials

A

If deliveries are delayed, buffer stock allows production to continue

62
Q

Problems associated with too much stock

A

Opportunity cost, cash, flow problems, increase storage, cost, increased financing costs, wastage,

63
Q

Problems associated with too Little stock

A

Lost customer, delays in production,

64
Q

What is just in time stock management?

A

Is a Japanese approach to stock management that aims to eliminate both of stock completely

65
Q

Key issues of just in time stock management include

A

Suppliers must be willing to deliver a lot, and they must be reliable, suppliers may need to relocate close to the company using just in time stock. Frequent deliveries will increase the rate of pollution

66
Q

What is lean production?

A

Lean production is a collective term for a range of Japanese techniques designed to eliminate waste from business process

67
Q

How can lean production also improve how business runs

A

More input from staff. Focus on quality. Fewer wasted resources. Competitive advantage through reducing waste of time

68
Q

Quality management definition

A

How to ensure everything you produce meets appropriate standard

69
Q

Quality control definition

A

Involves Check in output to find any faults in a production system 

70
Q

Quality assurance

A

Involves focusing on producing methods of preventing quality problems arising

71
Q

What is total quality management?

A

Less of a system and more of a way of encouraging all staff to get everything right the first time

72
Q

What is quality circles?

A

Quality cycle is a group of staff who meet regularly to find quality improvements

73
Q

What are reasons to improve your workforce?

A

Cell production. Small but frequent changes.

Quality and productivity improvements. Quality cycles. Regular suggests

74
Q

How can a competitive advantage occur from quality management?

A

It allows a premium price to be charged. It helps to gain distribution with retailers, confident they will not need to deal with product, returns and refunds. It creates brand, loyalty and repeat purchases 

75
Q

Key economic variables that influence businesses performance

A

Inflation. Interest rates. Exchange rates.

Taxation and government spending. The business cycle.

76
Q

What is inflation?

A

Inflation is the percentage rate at which average prices rise during a year with the whole UK economy

77
Q

What is exchange rates?

A

Exchange rates is the value of one currency expressed in terms of another(When our currency appreciates we can buy more of another currency vice versa, when our currency depreciates 

78
Q

What does spiced stand for?

A

Strong Pound imports, cheaper, exports, dearer

79
Q

How can an increase in the base interest rate affect businesses?

A

Consumers are likely to have less money to spend. The amount paid an interest or any borrowing by the business will rise. Consumers are less likely to borrow to buy.
Businesses are less likely to invest as the opportunity cost of investment, compared to keeping the money in the bank to an interest with no risk will be greater 

80
Q

What is the business cycle?

A

The pattern of economic growth in the UK tends to follow a pattern where strong boom is followed by periods of recession. Where the economy contracts

81
Q

What is the main goal of consumer protectionism legislation?

A

It is to ensure that the business Delivers on what they promised, the consumer 

82
Q

The two major acts of Parliament covering consumer protection are

A

The sale of goods act and the trade description act

83
Q

What does the employee protection do?

A

This aims to uphold the minimum standards of treatment that employees can expect from their employer, including sick, leave fair pay. 

84
Q

The CMA should ensure that

A

Companies have to set Competitive prices. Companies do not conclude with each other . Mergers and takeovers that will create overly powerful firms will not be allowed . 

85
Q

What is monopoly?

A

Single business that dominate supply in a given market

86
Q

What is oligopoly?

A

When a few farms Own the majority /Dominate the market

87
Q

Why is a market dominated by single business bad for consumers?

A

Because consumers will have a little choice, prices will tend to be high and there is little incentive for the dominant firm to innovate or provide great customer service

88
Q

Give me some examples of firms trying to make barriers to entry To sustain their market share

A

Patents and technological Breakthroughs. Incredibly strong brand and high advertising budgets. Heavily spending on infrastructure such as mobile phone networks

89
Q

Farms in an oligopoly market won’t compete in price wars because it will lower their profit margins, but what will they compete in?

A

Non-price competitions. Branding. Product features. Product design. Advertising. Tech innovations.

90
Q

What is collusion?

A

Collusion occurs when two or more rival businesses agree to fix supply or price with in the market. This is illegal

Business Theme 2 (1 decks)

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