Finance

Question 0

What is a direct cost?

Answer 0

They are the expenses that go to making a particular product . They are variable costs and increase as the firm expands output e.g raw materials, machinery, wages

Question 1

What is revenue?

Answer 1

The income earned by the business (sales-units sold x price- how much customers pay)

Question 2

What are indirect costs?

Answer 2

These are general overheads of running a business they are fixed costs and do not vary with output, they must be paid even if the firm produces nothing ę.g salaries, rent of property, telephone bills

Question 3

What is profit?

Answer 3

Revenue- costs

Question 4

name five sources of finance

Answer 4

Grants 
Trade Credit 
Overdrafts 
Loans (Banks and mortgages) 
Venture capital 
Friends and family

Question 5

What is a grant?

Answer 5

They are when companies give money to qualifying new/small businesses that does not have to be paid back

Question 6

What are short term sources of finance?

Answer 6

Sources that must be repaid over a few weeks or months

Question 7

What are trade credits?

Answer 7

The customer is given an invoice so they have an extra 1 or 2 months to pay for the product / service this gives them more time to earn the money to pay the debt

Question 8

What are overdrafts?

Answer 8

The firm is allowed to take out more money from the bank then it has in its account

Question 9

What are the disadvantages of overdrafts?

Answer 9

High interest rates

Question 10

What are the advantages of overdrafts?

Answer 10

Access to more money

Question 11

What is a loan and name the types of loans?

Answer 11

Money is given to the business , this money must be paid back:
Bank loans
Friends and family
Mortgages

Question 12

What are the advantages and disadvantages of bank loans?

Answer 12

They are quick and easy to take out for bigger businesses

It is hard to persuade a bank to lend money to a new business. It needs to be paid with interest, assets can be reposed if the loan isn’t repaid

Question 13

What are the advantages and disadvantages of loans from family?

Answer 13

Easier to get access to

Can cause tension between family if loan isn’t repaid

Question 14

What is venture capital?

Answer 14

Money invested by businesses or induviduals that specialise in providing finance for new or small businesses e.g dragons den

Question 15

Name 3 types of ways new/small businesses can get SUPPORT

Answer 15

The government
Private firms
Charities

Question 16

What do the government do to help small businesses?

Answer 16

They fund business link which helps businesses it gives advice on how to write a businesses plan and train staff

Question 17

What do the government get out of helping small businesses?

Answer 17

The government will receive taxation revenue when the firm makes a profit

Question 18

What do private firms do to help small businesses?

Answer 18

Offer advice on how to manage finances, calculate taxes ę.g banks they do this so businesses work with them and not their competitors

Question 19

What do charities do to help small businesses? And give an example

Answer 19

They usually help businesses by offering advice grants and low interest loans ę.g princes trust

Question 20

What is cash flow?

Answer 20

The flow of money into and out of the business

Question 21

What is cash inflow and outflow?

Answer 21

Cash inflow is money coming into the business

Cash outflow is money coming out of the business

Question 22

Why are cash flow forecasts used?

Answer 22

To predict when the business may face a liquidity problem

Question 23

What are the disadvantages of cash flow forecasts?

Answer 23

They’re essentially only a guess

Question 24

What is net cash flow?

Answer 24

Cash inflow - cash outflow

Question 25

What are sales?

Answer 25

The number of units of a product sold