Financial decisions

Question 1

How can businesses improve cash flow

Answer 1

overdrafts
hold less stock
get a longer credit period
give customers shorter credit period
debt factoring

Question 2

benefits of budgeting

Answer 2

helps to achieve targets like keeping costs low
help control income and expenditure
helps managers review their activities

Question 3

drawbacks of budgeting

Answer 3

can be restrictive
time consuming
inflation is difficult to predict

Question 4

zero-based budgeting

Answer 4

start with a budget of 0 each year
- plan years activities

Question 5

ADV of break-even analysis

Answer 5

easy to do
quick
used to help persuade banks to hand out loans

Question 6

CONS of break-even analysis

Answer 6

if data is wrong , then the results will be wrong
assumes that variable costs rise steadily whereas businesses can get discounts for buying in bulk

Question 7

Internal sources of finance

Answer 7

Retained profit
Rationalisation - which is when managers reorganise the business to make it more efficient - done by selling assets to generate capital
Personal savings

Question 8

External sources of finance

Answer 8

Banks loans
Mortgages
Family loans
Trade credit
Gov grants
Hire purchases- installments
Debt factoring
Overdraft
Venture capital