Potential - Business Flashcards
Explain an advantage of using of using price comparison websites when buying insurance ( 2 marks)
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
Explain one benefit of having a good credit rating (2)
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
Explain two benefits of paying bills by direct debit (4 marks:
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
Explain two financial implications of reaching old age (4 marks)
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.
Invoice discounting n debt factoring
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.
Explain one impact of a fall in VAT on a cash flow forecast (2)
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
Explain how adjusting for a prepayment affects the financial position (2)
Prepayment is added as a current asset so it increases value of assets
Explain one way in which a business could increase return on capital employed %
The business must increase the (gross) profit, to do so it needs to reduce its expenses
Explain an advantages of leasing as a source of finance (2)
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
Explain how a business could lower trade receivables days ratio (2 marks)
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
Explain a disadvantage of raising finance using a debenture (2)
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