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Business Theme 2 > Key Terms > Flashcards

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
Q

Net cash flow

A

Cash inflows - cash outflows

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26
Q

Opening balance

A

How much money a business has in the bank at the start of the time period

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27
Q

Closing balance

A

How much money a business has in the bank at the end of the time period

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28
Q

Sales forecasting

A

Predictions about how much sales revenue will be made by a business in a time period

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29
Q

Trend

A

The general path that a variable takes over a period of time

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30
Q

Sales volume

A

The number of products/ services sold over a time period

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31
Q

Sales revenue

A

The revenue from selling products/ services over a period of time

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32
Q

Price elastic

A

When demand for a good is responsive to a change in its price

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33
Q

Price inelastic

A

When demand for a good is not responsible to a change in its price

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34
Q

Fixed cost

A

A cost which does not change with output

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35
Q

Variable cost

A

A cost that varies directly with output

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36
Q

Total cost

A

Fixed costs + variable costs

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37
Q

Break even

A

The output when total costs= total revenue

Formula: fixed costs/ contribution

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38
Q

Contribution

A

The difference between variable cost and selling price per unit

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39
Q

Margin of safety

A

The difference between actual and break even output

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40
Q

Overhead costs

A

Costs which do not change with output e.g rent

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41
Q

Budget

A

A target for revenue or costs in a future time period

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42
Q

Historical budget

A

Using lasts years budget as a guide to what you will need to spend this year

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43
Q

Zero based budget

A

When you start from a budget of zero and work up

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44
Q

Variance analysis

A

The difference between the budget and the actual values

45
Q

Adverse variance

A

When the variance is negative for the business e.g costs are higher and revenues lower than budget

46
Q

Favourable variance

A

When the variance is positive for the business e.g costs lower and revenue higher than budget

47
Q

Profit

A

The difference between total revenue and total costs

48
Q

Cost of sales

A

The collective name given to the cost directly associated to marking a product/ service

49
Q

Fixed overheads

A

Costs that have to be paid no matter how well the business is going such as rent

50
Q

Gross profit

A

Sales revenue - costs of sales

51
Q

Operating profit

A

Gross profit - fixed overheads

52
Q

Profit for the year (net profit)

A

Operating profit + net financing costs - tax

53
Q

Net financing cost

A

Interest received from deposits in the bank - interest on loans and overdrafts

54
Q

Corporation tax

A

Tax paid by businesses out of profit - currently charged by the government at 19%

55
Q

Statement of comprehensive income

A

A document produced by plcs, that shows revenue, gross profit, net profit and operating profit

56
Q

Profitability

A

States profit as a % of sales

57
Q

Gross profit margin

A

Gross profit/ sales revenue x 100

58
Q

Operating profit

A

Operating profit/ sales revenue x 100

59
Q

Net profit margin

A

Net profit/ sales revenue x 100

60
Q

Liquidity

A

The ability of a business to find the cash it needs to pay its bills

61
Q

Current assets

A

Assets that is quick and easy to turn into cash

62
Q

Current liabilities

A

Debt that must be paid within a year

63
Q

Formula for the current ratio

A

Current assets/ current liabilities

64
Q

Formula for acid test ratio

A

(Current assets- stock)/ current liabilities

65
Q

Working capital

A

Current assets- current liabilities

66
Q

Job production

A

Making one off items to suit each customers’ individual requirements

67
Q

Batch production

A

Makes a group of products to one specification at a time

68
Q

Flow production

A

Continuous production of a single standardised product

69
Q

Automation

A

Using machines or computers to complete tasks instead of humans

70
Q

Cell production

A

Organising workers into small groups or cells, that can produce a range of different products more quickly than job production allows

71
Q

Productivity

A

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
Q

Production

A

Output of a business

73
Q

Efficiency

A

The extent to which production resources generate output without wastage

74
Q

Labour intensive production

A

When production mainly uses labour, rather than machines or automation

75
Q

Capital intensive production

A

When production mainly uses machines, rather than labour

76
Q

Capacity

A

The maximum possible output of a business

77
Q

Capacity utilisation

A

The proportion of the maximum possible output being used by a business

78
Q

Under- utilisation of capital

A

When the capacity utilisation % is low

79
Q

Over utilisation of capital

A

When the capacity utilisation is close to 100% or even above

80
Q

Stock/ inventory

A

Raw materials, semi finished good, and finished goods

81
Q

Buffer stock

A

The minimum stock that will be held

82
Q

Re order level

A

The level that stock has to fall to before more is ordered

83
Q

Re order quantity

A

The amount of stock that is ordered when the re order level is reached

84
Q

Lead time

A

The amount of time between when the stock is ordered and even it is received

85
Q

Just in time production

A

A system whereby no buffer stocks are held, and stocks are ordered as and when they are needed

86
Q

Waste minimisation

A

An aspect of lean production that focuses on reducing waste in production e.g wasted time, labour or stock/raw materials

87
Q

Lean production

A

A collective term for a range of techniques designed to eliminate waste such as JIT, kaisen, cell production

88
Q

Kaisen/ continuous improvement

A

Empowering staff to make a series of small suggestions to improve process in production

89
Q

Quality control

A

Checking output to remove any faulty goods at the end of a production process

90
Q

Quality assurance

A

System to prevent quality problems from arising

91
Q

Total quality management

A

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
Q

Quality circle

A

A group of staff who meet regularly to find quality improvements

93
Q

Inflation

A

The % change in the price level over a time period

94
Q

Exchange rate

A

The rate at which one currency can be swapped for another

95
Q

Appreciation of a currency

A

When the rate at which one currency can be swapped for another increases- currency has strengthened

96
Q

Depreciation of a currency

A

When the rate at which one currency can be swapped for another decreases- the currency has weakened

97
Q

Interest rate

A

The cost of borrowing and the reward for saving

98
Q

Business cycle

A

The pattern of economic growth, followed by a boom, recession, recovery and back to growth an economy falls

99
Q

Boom

A

When economic growth is high, employment is high, and inflation may also be high

100
Q

Recession

A

When economy and growth is negative, unemployment is high and inflation is usually low

101
Q

Recovery

A

The period immediately after a recession, where there is positive growth but this is slow

102
Q

Unemployment

A

When a worker is willing and able to work, but cannot find a job

103
Q

Income elasticity of demand

A

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
Q

Barrier to entry

A

Anything that makes it more difficult for a new firm to enter a market, such as patents

105
Q

Monopoly

A

When a single business dominates a market (25% market share and no close rivals)

106
Q

Oligopoly

A

When a few large firms dominate a market

107
Q

Competitive market

A

When there are a large number of similar firms selling similar goods/ services to a similar target market

108
Q

Minimum wage

A

The lowest wage you can legally pay a worker

109
Q

Cartel

A

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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