Paper 2 topic 2 and 3-finance and influence on businesses Flashcards
what is finance
Finance: money raised and used by a business.
what is finance function
Finance function: responsible for the management of money in a business.
what is financial information
Financial information: data which details profit, loss, cash-flow, break-even, profit margin and rate of return for the business to use in decision making.
what are assets
Assets are things the business owns e.g. any property
what is liability
Liabilities are things the business owes to someone e.g. any bank loans
why do business need finance
1.To established a new business.
2.To develop a new product launch.
3.To expand the business.
4.To pay for day to day operations
5.Recruitment
6.Marketing.
what is trade credit
Trade Credit: When you buy now and pay later to your suppliers.
what is crowdfunding
Crowdfunding (External): An online platform where businesses post a video about their business to attract investors around the world.
what is an advantage and disadvantages for crowdfunding
-can raise money from the public
disadvantages-interests is paid on loans
what is sales revenue
Total sales Revenue is the money generated from selling goods and services.
what is the formula for sales revenue
Total Sales Revenue = Units Sold x Selling Price
what is the formula for total cost
Total Costs = Fixed Cost + Variable Cost
what is the formula for fixed cost
Total Fixed costs = All fixed costs added
together
what is the fixed cost
Fixed costs do not change depending on
number of units sold. They have to be
paid even if the firm business produces
nothing.(EG-RENT)
what is a variable cost
Variable costs that changes depending
on number of units sold.
what is the formula for variable cost
Total Variable costs = number of units
sold x variable costs per unit
what is the formular for profit/loss
sales revenue-total cost
what is cost of sales
All of the costs which must be paid for in order to make a specific product.
what is gross profit
the selling price of your product minus the cost of producing it
gross profit formula
Gross Profit = Revenue – Cost of Goods Sold.
what is net profit
the actual profit after working expenses not included in the calculation of gross profit have been paid.
what is the formula for net profit
gross profit - operating expenses and taxes
what is cash
Money held by a business on the
premises and in bank accounts
what is profit
The amount a business has made after
subtracting total costs from revenue.
They can have a lot of cash but make no
profit. The business may also make profit
but have no cash.
what is the formula for cash inflows
Cash inflows – any flow of cash into a business
what is cash outflows
Cash outflows – any flow of cash out of a business
examples of cash inflow
1.Sales of products
2.Bank loans
3.Government Grants
4.Personal saving from the owners
what are some examples of cash outflow
1.Rent & Rates
2.Payment to suppliers
3.Wages & Salaries
4.Utility Bills
what is the formula for gross profit margin
(Gross Profit / Sales Revenue) x 100
what is the meaning of gross profit margin
Shows how profitable a product is per unit sold!
what is ethical decisions
Ethical decision - a morally correct decision that has a positive impact on stakeholders or the environment.
what are pressure groups
Pressure groups - an organisation that aims to influence businesses to act ethically.
what is GDP
GDP - The total value of production and spending of goods and services within an economy over a period of time.
WHAT IS THE ECONOMIC CYCLE
An economic cycle is the circular movement of an economy as it moves from expansion to contraction and back again. Economic expansion is characterised by growth and contraction, including recession, a decline in economic activity that can last several months.
WHAT ARE THE ECONOMIC CYCLE (HINT- THERE IS 3)
Boom - when the economy’s GDP has peaked. Consumer incomes are high and employment rate is high.
Recession - when the economy GDP has dropped. Consumer incomes are low and employment levels are low.
Recovery - when the economy’s GDP rises again after a fall. Consumer incomes are rising and employment is also rising.
what does boom consists of
High employment
High consumer income
Businesses are likely to experience higher sales.
what does recession consist of
Low employment
Low consumer income
Businesses are likely to experience lower sales especially for luxury goods.
what does recover consist of
Increasing employment
Increasing consumer income
Businesses are likely to consider investing more money into growing their business again.
if unemployment
Increases -
how would it impact each factor
Demand-
Demand of inferior goods may rise.
Recruitment-
People without jobs are looking for jobs, this may make recruitment easier as there is a larger labour pool to choose from.
Wages-
Larger labour pool, so businesses can offer lower wages when there are lots of jobless people who are looking for a job at the same time.
Training-
If people are unemployed for a long term, they need to be reskilled and require more training.
what is interest rates
The cost of borrowing and the reward for saving money expressed as a percentage.
what is inflation rates
The persistent increase in prices of goods and services over period of time. Expressed as a percentage.
what is exchange rates
The value of one currency against another currency. Expressed as a ratio.
what is appreciation and depreciation
Appreciation means the currency is becoming stronger
For example:
£1 = €1.15 to £1 = €2.05
Depreciation means the currency is becoming weaker
For example:
£1 = €2.05 to £1 = $1.15
WHAT IS SPICED ACRONYM
Strong
Pound
Imports
Cheaper
Exports
Dearer
what is globalisation
Globalisation - The process by which the world is becoming increasingly interconnected as a result of increased movement of people and capital between nations.
