LO7 Flashcards
Give 2 reasons why Businesses fail
1) poor financial control
2)lack of knowledge
Explain why the bank might chedck a business plan before agreeing a overdraft.
The bank might have used the business plan to decide whether the business is likely to pay back overdraft by checking first year targets
Which of the following is a likely impact of automation on employees
reduced job security
owners saving:
internal or external?
short or long term?
1)short and long
2)internal
Reserves
(retained profits)
short or long term?
external or internal?
avaliability to forms of business ownership?
1) long term
2) internal
3)all businesses
Define trade credit
Trade credit is the extension to small businesses by suppliers that effectively allow them to buy material now and pay later
Trade credit
short term or long term?
internal or external?
what form of business ownership?
1)short
2)external
3)all businesses
Define hire purchase
Hire purchase is the when you put a deposit down and pay it in monthly installments
Hire purchase
long term or short term?
external or internal?
what form of business
1)short term
2)external
3)all businesses
credit card
short term or long term?
external or internal?
what form of business ownership?
1)short term
2)external
3)all businesses
overdraft
short term or long term?
external or internal?
what form of business ownership?
1)short term
2)external
3)all businesses
Loan
short term or long term?
external or internal?
what form of business?
1)long term
2)external
3)all businesses
morgage
short term or long term?
external or internal?
what type of ownership?
1)long term
2)external
3)all businesses
Venture capitalistic
short term or long term?
external or internal?
what form of business?
1)long term
2)external
3)all businesses
Share issue
long term of short term
external or internal
what form of busienss ownership
1)long
2)external
3)companies only
Crowd funding
short term or long term?
internal or external?
what form of business ownership?
1)long term
2)external
3)all companies
Owners’ savings - advantages
1)no need to repay the money
Owners savings - disadvantages
1)owners may not have enough savings
reserves - advantages
1)low costs, no interest to be paid
Reserves- disadvantages
1)not avaliable to new businesses in their first year of trading
Trade credit- advantage
1)improves cash flow
Trade credit - disadvantages
1)interest charged if not paid within the timescale
Hire purchase - advantages
1)payments over period of time
Hire purchase - disadvantages
1)interest and additional charges make it expensive
credit card - advantages
1)if repaid within the payment period, then borrowing is free
Credit card - disadvantages
1)interest charged if not repaid within the interest-free period
overdraft - advantages
1) can help with short-term cash problems
Overdraft - disadvantagers
1) prolonged use makes it expensive
Loan - advantages
1)fixed instalments helps with cash flow management
Loans- disadvantage
1)the length of the loan and the interest rate can make it expensive
Mortgage - advantages
1) can obtain premises that could not be afforded otherwise
mortgage - disadvantages
1)can only be used to purchase a property
venture capitalist - advantages
1)finance and advice
venture capitalist - disadvantages
1)equity funded - the venture capitalist becomes an owner
Share issue - advantag
1) no need to be pay interest
Share issue - disadvantag
issuing more shares may dilute the control of exisiting shareholdersders need to be paid dividends out of profit
Crowdfunding-advantages
1)finance and promotion of business
2)avaliable to businesses struggling to secure funding by convectional methods
Crowdfunding - disadvantages
1)cost of providing appropiate rewards to investors
2)business intentions made public, so may be copied
