KT17: 2.1.2 external finance, 2.1.3 liability, 2.1.4 planning

Question 1

Bankrupt

Answer 1

when an individual is unable to meet personal liabilities, some or all of which can be as a consequence of business activities

Question 2

Creditors

Answer 2

those owed money by a business

Question 3

limited liabilities

Answer 3

owners are not liable for the debts of the business; they can lose no more than the sum they invested

Question 4

sole trader

Answer 4

a one-person business with unlimited liability

Question 5

unlimited liability

Answer 5

owners are liable for any debts incurred by the business, even if it requires them to sell all their assets and possessions and become personally bankrupt

Question 6

best-case

Answer 6

an optimistic estimated of the best possible outcome

Question 7

business plan

Answer 7

a document setting out a business idea and showing how it is to be financed, marketed and put into practice

Question 8

cash-flow forecast

Answer 8

estimating future monthly cash inflows and outflows, to find out the net cash flow

Question 9

just-in time

Answer 9

ordering stock so that it arrives just before it is needed with no reserves

Question 10

Overdraft

Answer 10

short-term borrowing from a bank, the business only borrows as much as it needs to cover its daily cash shortfall

Question 11

worst case

Answer 11

a pessimistic estimate assuming the worst possible outcome