finance Flashcards
What are the befits of a loan?
Quick money
Can be repaid over a long time
What is a a loan?
a loan is a borrowed amount of money from the bank
What are the costs of a loan?
Interest has to be paid
What is commercial mortgage?
A very large amount of money borrowed from the bank
What are the benefits of commercial mortgage?
Paid over a long period of time like 25 years
Quick money
Interest rate is low
Commercial mortgage costs are?
Interest has to be pain
Can lose property If you don’t pay back
What is leasing?
Renting something out
Benefits do leasing are?
Don’t have to pay a large amount of money
The thing you leased is replaced if Broken
What are the costs of leasing?
It can be more expensive that buying
You never own the asset
What is selling shares?
This is when the business sells apart of there business to shareholders only public limited company’s can do this and private limited company’s can do this
What are the benefits of selling shares?
Large amount of money can be raised
Don’t have to pay back ant money
No interest at all
What are the costs of selling shares?
Shareholders have a day on how you run your business
Hire purchase is?
When you pay a deposit for the asset you are buying and pay them monthly payments until it is fully paid
Advantages of hire purchase is?
The money does not need to be lid ASAP
Disadvantages of hire purchase is?
The company still own the asset until you have finally paid it off
More expensive as you have added interest
What is a grant?
This is money given to public limited company’s it is money given to them but the government
What is advantages of grants?
Do not have to pay it back
Disadvantages of grants are?
Only given to companies who can help a depressed area to get employment
What is retained profits?
Using money from previous years of profit that has not been spent
Advantages of retained profits are?
Doesn’t have to be paid back
Disadvantages of retained profits?
The money could be used for better things
Government funding is?
When the government helps your business finance
Advantages of government funding is?
Money doesn’t have to be repaid
Disadvantages of government funding?
Must stick to budget
Money had to be spent on what the government says
Owners savings?
This is the owners personal money spent to help the business
Advantages of owners saving is?
No loss of control
Disadvantages do owners savings?
Owners personal money is lost
How do you calculate the profit?
Sales - expenses
What is the break even point
Total costs = total revenue
What is fixed costs
Costs that do not change on the level of input or how many units are sold or made
What is variable costs?
Costs that change depending on how many units of product is made
How do you calculate revenue?
Selling price x units sold
How do you calculate the break even point?
Total costs = total revenue
What is revenue?
The name given to money that a business receives through selling a product
How can poor cash flow occur?
Spending to much money on raw materials
giving customers too long to pay back
Not receiving enough money from sales
How to improve cash flow?
Look for cheaper suppliers
Chase up customers to claim the money they own your business and offer discounts
Selling equipment or assets that are no longer needed within the business
What is a cash budget?
Is a document that is prepared to help manage cash flow, it contains receipts and payments made by the business it allows the business to make financial decisions
What are the benefits of preparing a cash budget?
To show if the business is in surplus or deficit
Will show id additional finance is needed
It can help make financial decisions within the business
What is gross profit?
The profit from selling and buying
What is net profit?
The profit after adding other income and subtracting expenses
Technology is finance?
Microsoft exel
Prepare cash budgets
Calculate profit
Create graphs to show income and expenditure
What is the difference between gross and net profit?
Gross profit is all the profit from buying and selling and net profit is when added income is added and expenses are deducted
What could a partnership do to raise finance?
Increase the number of partners within the business, this means that more finance is flowing into the business new skills and knowledge is coming into the business, however this can increases the risk of disagreements occurring and profits being distributed among more people
