Definitions 2.1 Flashcards
Fixed costs
those that do not change as the number of sales change - for example, rent or salaries
Variable costs
those that change in line with the amount of business - for example, the cost of buying raw materials
Working capital
the finance available for the day-to-day running of the business
Angel investors
investors who back a business before it has opened its doors, taking a full equity risk i.e. if it fails then the angel investor will lose everything invested
Collateral
an asset used as security for a loan. It can be sold by a lender if the borrower fails to pay back a loan
Crowdfunding
obtaining external finance from many individuals, small investments, usually through web based appeal
Public limited company
a company with limited liability and shares, which are available to the public. It shares can be quoted on the stock market
Seed corn capital
the early stage finance that might come form an angel investor
Share capital
business finance that has no guarantee of repayment or of annual income, but gains a share of the control of the business and its potential profits
Stock market
Stock market
Venture capital
high-risk capital invested in a combination of loans and shares, usually in a small, dynamic business
Bankrupt
when an individual is unable to meet personal liabilities, some or all of which can be as a consequence of business activities
Creditors
those owed money by a business - for example, suppliers and bankers
Best case
an optimistic estimate of the best possible outcome - for example, if sales prove much higher then expected
Business plan
Business plan
Cash flow forecast
estimating future monthly case inflows and outflows, to find out the net cash flow
Just-in-time
ordering stock so that it arrives just before it is needed, just in time, i.e. having no stockpiles to cover for late delivery
Overdraft
short term borrowing from a bank. The business only borrows as much as it needs to cover its daily cash shortfall
Worst case
a pessimistic estimate assuming the worst possible outcome - for example, sales are very disappointing
Contingency plans
plans held in reserve in case things go wrong - for example, a cash flow forecast based on sales being 10% lower then expected
Real incomes
changes in household incomes after allowing for changes in prices i.e. percentage change in household income - inflation = real income
Sales forecast
a method of predicting future sales using statistical methods
Trend
the general path that a series of values (e.g. sales) follows over time, disregarding variations or random fluctuations
Fixed costs
those that do no change as the number of sales change
Piece-rate labour
paying workers per item they make, that is, without regular pay
Sales revenue
the number of units sold in a time period multiplies by the average selling price of those units
Total costs
all the costs of producing a specific level output level , i.e. fixed costs plus total variable costs
Total variable costs
all the variable costs of producing a specific output level - that is, variable costs per unit multiplied by the number of units sold
Variable cots
those that change in line with the amount of business - for example, the cost of buying raw materials
Break even chart
a line graph showing total revenues and total costs at all possible levels of output or demand from zero to maximum capacity
