Finance Flashcards
How do you calculate revenue?
Items sold x Price
How do you calculate total costs?
Fixed costs + Variable costs
What is the difference between fixed and variable costs?
Fixed costs don’t vary with output and have to be paid even if the firm produces nothing.
Variable costs vary with output and increase as the firm expands output.
How do you calculate profit?
Total revenue - Total costs
What do new firms need?
Start-up capital to buy the assets needed to run the business.
Money to improve their poor initial cash flow - they’ll need to pay their suppliers before they gain revenue.
Define assets
Valuable items the business owns
Why is starting a small business a risk?
1) Probably unlimited liability.
2) Lack of owners expertise/experience / own funds.
3) Unproven business venture.
4) Success based on business plan = forecasts.
5) High start-up costs.
6) Difficult to access finance.
7) Competition.
What are grants?
Money provided by the government for a business to employ workers in an area of high unemployment.
Name an advantage and disadvantage of grants
Doesn’t need to be repaid.
Hard to get one due to high competition from other businesses.
What is trade credit?
Where suppliers deliver goods now and are willing to wait for a number of days before payment.
What is an overdraft?
Where a bank allows a firm to take out more money than it has in its bank account.
What are the 3 types of loan?
1) Bank.
2) Friends & family.
3) Mortgages.
Who gives financial support to new businesses?
1) Government.
2) Private Firms.
3) Charities.
4) Chambers of Commerce.
Define cash flow
The flow of all money into & out of the business.
Define cash inflow
When a firm sells its produce, money flows in.
