Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business paper 2 > Finance > Flashcards

Finance Flashcards

1
Q

what is the finance function

A

the finance department in a business - usually only in larger businesses as small businesses usually employ a firm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what is finance

A

money raised and used by a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what is financial information

A

includes details of profit, loss, cash flow, break-even, profit margin and average rate of return - this information is used in decision making

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what is the role of the finance function

A

arranging finance - loans
managing payments
forecasting cash flow
calculating break-even
calculating ARR
calculating sales and revenues
calculating profit or loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what are the 5 reasons that businesses need finance

A

establishing a new business - factory, machinery
funding expansion -materials, stock, machinery, campus
recruitment - selections, wages/salaries
marketing - campaigns, advertising, public relations
running the business - daily costs, paying expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is owners capital

A

money from savings put into the business by the owner/s

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what are the advantages of owners savings

A

no need to repay
no interest
doesn’t affect ownership or control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what are the disadvantages of owners savings

A

owner risks savings
owner may not have enough savings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what is retained profits

A

profit that is not distributed to shareholders as dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what are the advantages of retained profits

A

no need to repay
no interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what are the disadvantages of retained profits

A

business may not have made profits
owners wont get profit as income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what is sale of assets

A

items are sold by the business to get money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what are the advantages of sale of assets

A

no need to repay
no interest
good if selling old equipment or stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what are the disadvantages of sale of assets

A

may be difficult to sell
may take time to sell

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what is overdraft

A

an arrangement with a bank that a business can spend more money than it has in its account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what are the advantages of overdraft

A

meets short term cash flow problems
interest is only paid on amount owed
repayment is only due when the business closes or the overdraft is no longer needed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what are the disadvantages of overdraft

A

interest is charged for each day that money is owed so can be expensive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what is trade credit

A

when the business buys goods to sell and doesnt need to pay the supplier for a period of seven days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what are the advantages of trade credit

A

can help with cash flow problem
no interest if repaid in the agreed time frame
business can have goods to sell before paying for them

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what are the disadvantages of trade credit

A

goods must be paid for even if they do not sell
interest is charged if payment is late

22
Q

what is taking on a new partner

A

adding a new partner who contributes some new capital

23
Q

what are the advantages of taking on a new parnter

A

new skills
no need to repay
no interest

24
Q

what are the disadvantages of taking on a new partner

A

existing owners have to give the new one a say in the running of the business
sole traders must become a partnership to do this

25
Q

what is crowdfunding

A

money raised through an appeal to the public who are supporters of the business

26
Q

what are the advantages of crowdfunding

A

no need to repay
no interest
new supporters can contribute a lot of money to the business

27
Q

what are the disadvantages of crowd funding

A

ownership will be shared if the money is raised through investment
interest will be paid if the money is raised through a loan

28
Q

what is a loan

A

a sum of money borrowed for a stated period at an agreed rate of interest

29
Q

what are the advantages of a loan

A

repayment can me made in fixed sums over time
money is available immediately

30
Q

what are the disadvantages of a loan

A

interest must be paid
the business may need to give the lender security

31
Q

what is a share issue

A

money raised from the investors by selling shares

32
Q

what are the advantages of a share issue

A

no need to repay
no interest
new investors can contribute a lot of money

33
Q

what are the disadvantages of a share issue

A

existing owner has to give shareholders a say in the running of a business
shares can only be sold by limited companies

34
Q

which of the finance methods are short term

A

overdraft
trade credit
owners capital

35
Q

which of the finance methods are medium term

A

owners capital
sale of assets
retained profits
loans

36
Q

which of the finance methods are long term

A

owners capital
loans
crowdfunding
taking on a new partner
share issue

37
Q

what is external finance

A

finance raised from sources outside the business: overdraft, trade credit, loan, crowd funding, share issues

38
Q

what is internal finance

A

finance raised from within the business: owners capital, retained profit, sale of assets

39
Q

what is revenue

A

the sum of money a business earns from all the sales it makes

40
Q

what is the equation for revenue

A

selling price x quantity sold

41
Q

what should a business do to increase its revenue

A

increase the products price
reduce the price to increase sales
increase sales by:
advertising, producing more, selling wider range

42
Q

why would a business not want to increase revenue

A

to avoid expanding
may want to sell to a niche market

43
Q

what is a fixed cost

A

a cost that remains the same with output

44
Q

what is a variable cost

A

a cost that changes with output

45
Q

what is a total cost

A

the total variable costs + the total fixed costs

46
Q

why would a business want to minimise its costs

A

to increase profits
reduces prices - more competitive without cutting profits
save money in order to expand or update machinery

47
Q

how would costs of a business be reduced

A

using technology instead of workers
finding cheaper supplies
asking suppliers to reduce costs or workers to take a pay cut

48
Q

what is cost of sales

A

the cost of the business producing the goods to sell

49
Q

what is expenses

A

the costs of operating the business

50
Q

what is the equation for gross profit

A

sales - cost of sales

51
Q

what is the equation for net profit

A

gross profit - expenses

52
Q
A

Business paper 2 (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions