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Key Terms Flashcards

1
Q

Source of finance

A

Places from which businesses may gain finance

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2
Q

Internal source of finance

A

Places where a business may gain finance from within the business

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3
Q

Owner’s capital

A

Personal savings or share capital raised

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4
Q

Retained profit

A

Any profit left in the business after the cost of sales, fixed overheads, tax and financing costs have been paid

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5
Q

External source of finance

A

Places where a business may gain finance from outside the business

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6
Q

Collateral

A

Something of value that is used as security when a loan is offered

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7
Q

Peer to peer lending

A

Websites that match up businesses wanting to borrow with investors who are looking for projects

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8
Q

Business angels

A

Individuals who invest in the early stages of a riskier business and take an equity share in return for providing finance, advice and guidance

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9
Q

Crowdfunding

A

When many small investors fund a projecT, usually through a website

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10
Q

Share capital

A

Finance raised from the swelling of shares

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11
Q

Venture capital

A

Provision of finance from professional investors in return for equity (loans). Riskier projects are often financed this way

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12
Q

Overdraft

A

A facility provided by a bank where depositors can go into a negative balance in the bank account

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13
Q

Leasing

A

When an asset is rented rather than purchase

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14
Q

Trade credit

A

When a business is able to buy now and pay later for its supplies

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15
Q

Grants

A

Money given by the government or local council to businesses who are making a positive difference in a community

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16
Q

Limited liability

A

When a business is a separate legal entity to its owners, which means that if the business goes bankrupt the owners only lose what they originally put into the business, and not their personal belongings

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17
Q

Unlimited liability

A

When a business and its owner are the same legal entity. The debts of the business are the debts of the owners and personal property can be sold to pay the debts of the business

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18
Q

Liquidation

A

When a business fails and sells its asserts off to pay its debts

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19
Q

Sole trader

A

When there is one single worker of a business with unlimited liability

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20
Q

Partnership

A

When there are two + owners of a business who have unlimited liability

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21
Q

Cash flow forecast

A

A financial statement showing all the money flowing into and out of a business

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22
Q

Business plan

A

A document setting out a business idea, how it will be financed, marketed and put into practice

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23
Q

Cash inflow

A

Money flowing into a business from activities such as selling goods and services

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24
Q

Cash outflow

A

Money flowing out of a business to pay for things such as raw materials

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25
Net cash flow
Cash inflows - cash outflows
26
Opening balance
How much money a business has in the bank at the start of the time period
27
Closing balance
How much money a business has in the bank at the end of the time period
28
Sales forecasting
Predictions about how much sales revenue will be made by a business in a time period
29
Trend
The general path that a variable takes over a period of time
30
Sales volume
The number of products/ services sold over a time period
31
Sales revenue
The revenue from selling products/ services over a period of time
32
Price elastic
When demand for a good is responsive to a change in its price
33
Price inelastic
When demand for a good is not responsible to a change in its price
34
Fixed cost
A cost which does not change with output
35
Variable cost
A cost that varies directly with output
36
Total cost
Fixed costs + variable costs
37
Break even
The output when total costs= total revenue | Formula: fixed costs/ contribution
38
Contribution
The difference between variable cost and selling price per unit
39
Margin of safety
The difference between actual and break even output
40
Overhead costs
Costs which do not change with output e.g rent
41
Budget
A target for revenue or costs in a future time period
42
Historical budget
Using lasts years budget as a guide to what you will need to spend this year
43
Zero based budget
When you start from a budget of zero and work up
44
Variance analysis
The difference between the budget and the actual values
45
Adverse variance
When the variance is negative for the business e.g costs are higher and revenues lower than budget
46
Favourable variance
When the variance is positive for the business e.g costs lower and revenue higher than budget
47
Profit
The difference between total revenue and total costs
48
Cost of sales
The collective name given to the cost directly associated to marking a product/ service
49
Fixed overheads
Costs that have to be paid no matter how well the business is going such as rent
50
Gross profit
Sales revenue - costs of sales
51
Operating profit
Gross profit - fixed overheads
52
Profit for the year (net profit)
Operating profit + net financing costs - tax
53
Net financing cost
Interest received from deposits in the bank - interest on loans and overdrafts
54
Corporation tax
Tax paid by businesses out of profit - currently charged by the government at 19%
55
Statement of comprehensive income
A document produced by plcs, that shows revenue, gross profit, net profit and operating profit
56
Profitability
States profit as a % of sales
57
Gross profit margin
Gross profit/ sales revenue x 100
58
Operating profit
Operating profit/ sales revenue x 100
59
Net profit margin
Net profit/ sales revenue x 100
60
Liquidity
The ability of a business to find the cash it needs to pay its bills
61
Current assets
Assets that is quick and easy to turn into cash
62
Current liabilities
Debt that must be paid within a year
63
Formula for the current ratio
Current assets/ current liabilities
64
Formula for acid test ratio
(Current assets- stock)/ current liabilities
65
Working capital
Current assets- current liabilities
66
Job production
Making one off items to suit each customers’ individual requirements
67
Batch production
Makes a group of products to one specification at a time
68
Flow production
Continuous production of a single standardised product
69
Automation
Using machines or computers to complete tasks instead of humans
70
Cell production
Organising workers into small groups or cells, that can produce a range of different products more quickly than job production allows
71
Productivity
Output her unit of input over a time period | Labour productivity is output per unit of labour over a time period, or output per worker hour). Measure of efficiency
72
Production
Output of a business
73
Efficiency
The extent to which production resources generate output without wastage
74
Labour intensive production
When production mainly uses labour, rather than machines or automation
75
Capital intensive production
When production mainly uses machines, rather than labour
76
Capacity
The maximum possible output of a business
77
Capacity utilisation
The proportion of the maximum possible output being used by a business
78
Under- utilisation of capital
When the capacity utilisation % is low
79
Over utilisation of capital
When the capacity utilisation is close to 100% or even above
80
Stock/ inventory
Raw materials, semi finished good, and finished goods
81
Buffer stock
The minimum stock that will be held
82
Re order level
The level that stock has to fall to before more is ordered
83
Re order quantity
The amount of stock that is ordered when the re order level is reached
84
Lead time
The amount of time between when the stock is ordered and even it is received
85
Just in time production
A system whereby no buffer stocks are held, and stocks are ordered as and when they are needed
86
Waste minimisation
An aspect of lean production that focuses on reducing waste in production e.g wasted time, labour or stock/raw materials
87
Lean production
A collective term for a range of techniques designed to eliminate waste such as JIT, kaisen, cell production
88
Kaisen/ continuous improvement
Empowering staff to make a series of small suggestions to improve process in production
89
Quality control
Checking output to remove any faulty goods at the end of a production process
90
Quality assurance
System to prevent quality problems from arising
91
Total quality management
A system to encourage all staff to think about quality in a business, so quality is no just the job of production but of everybody
92
Quality circle
A group of staff who meet regularly to find quality improvements
93
Inflation
The % change in the price level over a time period
94
Exchange rate
The rate at which one currency can be swapped for another
95
Appreciation of a currency
When the rate at which one currency can be swapped for another increases- currency has strengthened
96
Depreciation of a currency
When the rate at which one currency can be swapped for another decreases- the currency has weakened
97
Interest rate
The cost of borrowing and the reward for saving
98
Business cycle
The pattern of economic growth, followed by a boom, recession, recovery and back to growth an economy falls
99
Boom
When economic growth is high, employment is high, and inflation may also be high
100
Recession
When economy and growth is negative, unemployment is high and inflation is usually low
101
Recovery
The period immediately after a recession, where there is positive growth but this is slow
102
Unemployment
When a worker is willing and able to work, but cannot find a job
103
Income elasticity of demand
Measures the sensitivity of demand to change in income Negative income elasticity means that the income rises, demand falls Positive income elasticity means that as incomes rise, demand rises
104
Barrier to entry
Anything that makes it more difficult for a new firm to enter a market, such as patents
105
Monopoly
When a single business dominates a market (25% market share and no close rivals)
106
Oligopoly
When a few large firms dominate a market
107
Competitive market
When there are a large number of similar firms selling similar goods/ services to a similar target market
108
Minimum wage
The lowest wage you can legally pay a worker
109
Cartel
When a group of businesses make a formal agreement to act as if they are one company- usually to increase prices for consumers

Business Theme 2 (21 decks)

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