Potential - Business Flashcards

1
Q

Explain an advantage of using of using price comparison websites when buying insurance ( 2 marks)

A

Search larger number of insurers - price comparison websites feature large number of different police’s which can be filtered based on requirements such as cover and premium

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2
Q

Explain one benefit of having a good credit rating (2)

A

Access lower interest rates on loans - good credit rating helps individuals access better interest rates on loans, because seen as less risky, reducing the overall cost of borrowing money

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3
Q

Explain two benefits of paying bills by direct debit (4 marks:

A

Improved credit rating - ensures bills are always paid on time helps maintain a good credit rating
Possible discounts - some businesses offer discounts on the price paid if a direct debit is set up to pay each month

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4
Q

Explain two financial implications of reaching old age (4 marks)

A

Higher spending on health - old people may find that expenses on healthcare rise, such as medications, hearing aids and mobility equipment like stairlifts
Lower monthly income - old people usually retired, so less likely to be earning from regular work, reducing their monthly household income.

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5
Q

Invoice discounting n debt factoring

A

Both relate to receivables, amounts owed by customers

Debt factoring is where you sell your receivables to a debt factoring firm and they give you cash for them, potentially 90 percent of value.

Invoice discounting - given a loan that’s secured against the value of receivables and as they receivables are received that effectively pays of the loan.

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6
Q

Explain one impact of a fall in VAT on a cash flow forecast (2)

A

Lower cash outflows on payments to suppliers - expenses that a business pays for that include VAT will have a lower price, thereby lowering cash outflows as suppliers are paid

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7
Q

Explain how adjusting for a prepayment affects the financial position (2)

A

Prepayment is added as a current asset so it increases value of assets

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8
Q

Explain one way in which a business could increase return on capital employed %

A

The business must increase the (gross) profit, to do so it needs to reduce its expenses

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9
Q

Explain an advantages of leasing as a source of finance (2)

A

Flexible monthly finance for assets - leasing enables a business to pay for assets such as motor vehicles on an affordable monthly basis rather than pay a large amount up front

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10
Q

Explain how a business could lower trade receivables days ratio (2 marks)

A

By providing an incentive (offer) for customers to pay earlier - customers may use an incentive such as a discount to settle the amounts they owe quicker

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11
Q

Explain a disadvantage of raising finance using a debenture (2)

A

Debentures require you to pay a huge lump sum at the end of the payment period - this could massively and negatively affect your cash flow

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