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Edexcel GCSE Business > Putting A Business Idea Into Practice > Flashcards

Putting A Business Idea Into Practice Flashcards

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1
Q

Business aim

A

What a business wants to achieve

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2
Q

Business objective

A

How the business will achieve its aim or aims

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3
Q

Financial aims

A

Survival
Profit
Sales
Market share
Financial security

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4
Q

Market share

A

The proportion of sales in a market that are taken by one business

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5
Q

Non-financial aims

A

Social concerns
Personal satisfaction
Challenge
Independence
Control

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6
Q

Profit

A

The amount of revenue left over once costs have been deducted

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7
Q

Social objective

A

Likely to be non-financial, such as to reduce the carbon emissions of a business or improve the quality of life for a local community

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8
Q

Why business have different aims and objectives

A

The entrepreneur needs to consider the industry in which their business operates, as it will have an influence on its aims and objectives

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9
Q

Revenue formula

A

Revenue = price x quantity

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10
Q

Income stream

A

The source of regular income that a business receives. This could be through the money it receives from customers, or other areas such as investment income

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11
Q

Costs

A

What a business has to pay in order to continue operating

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12
Q

Viable

A

Capable of working or succeeding

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13
Q

Fixed costs

A

Do not change, no matter ho many products or services a business sells

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14
Q

Examples of fixed costs

A

Insurance
Rent
Tax
Salaries

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15
Q

Variable costs

A

Change depending on how many products or services a business sells

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16
Q

Examples of variable costs

A

Electricity bills
Raw materias

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17
Q

Total costs formula

A

Total cost = total fixed costs + total variable costs

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18
Q

Income statement

A

A financial statement showing the amount of money earned and spent in a particular period and the resulting profit and loss

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19
Q

Stakeholder

A

Anyone who has an interest in the activities of a business, such as its workers, its suppliers, the local community and the government

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20
Q

Gross profit

A

The amount of profit that a business makes on a product or service before the costs of producing and selling that product or service are deducted

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21
Q

Gross profit formula

A

Gross profit = sales revenue - costs of sales

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22
Q

Net profit

A

The amount of profit that a business makes on a products or service after the costs of producing and selling that product or service are deducted

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23
Q

Net profit formula

A

Net profit = gross profit - other operating expenses and interest

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24
Q

Interest

A

A percentage if the amount of money borrowed that must be repaid in addition to te original amount borrowed

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25
Q

Interest on loans formula

A

Interest in % = total repayment - borrowed amount / borrowed amount x 100

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26
Q

Break-even point

A

The point where revenue received meets all of the costs of a business

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27
Q

Break-even point in units

A

Tells the business how many units it needs to sell in order to meet the break-eve point

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28
Q

Break-eve point in units formula

A

Break-even point in units = fixed costs/ (sales price - variable )

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29
Q

Break-even point in currency

A

Tells the business how much money needs to be taken to meet the break-even point

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30
Q

Break-even point in currency formula

A

Break-even point in currency = break-even point in units x sales price

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31
Q

Margin of safety

A

How much sales can fall before the business’s break-even point is reached again

32
Q

Margin of safety formula

A

Margin of safety = actual or budgeted sales - break-even sales

33
Q

Impact of revenue increasing

A

Positive impact as long as the costs remain the same
If costs rise at the same time, could reduce profit made from increased revenues

34
Q

Impact of revenue decreasing

A

Negative impact unless costs also decrease at the same time
They could investigate ways if making savings on costs that are within its control

35
Q

Impact of costs increasing

A

Profits will be affected negatively unless revenue can be increased
Business can pass the cost onto its customers by increasing the price of its goods

36
Q

Impact of costs decreasing

A

Immediate benefit to the business as it means that it will make more money per unit sold
If customers are aware that costs have decreased, they may expect the business to reduce the price of its goods or services

37
Q

Cash

A

Amount of money that a business has in its bank account

38
Q

Cash flow

A

The way in which money comes into the business from customers and goes out of the business to pay suppliers

39
Q

Credit

A

The amount of money that a financial institution or supplier will allow a business to use, which it must pay back in the future at an agreed time

40
Q

Overheads

A

Fixed costs that come from running an office, shop or factory, which are not affected by the number of specific products or services that are sold

41
Q

Examples of overheads

A

Rent
Maintenance of company vehicles
Bills such as electricity and telephone

42
Q

Insolvent

A

A business that is unable to pay its debts and/or owes more money than it is owed

43
Q

Preventative measures to take in which a business can avoid becoming insolvent

A

Arranging sensible credit arrangements with suppliers and customers
Limiting the number of customers to which it gives credit

44
Q

Cash flow forecast

A

An estimate of how much cash will come into the business and how much cash will leave the business over the purse of a year

45
Q

Cash inflows

A

All the money that comes into the business

46
Q

Consumables

A

Items that get ‘used up’, such as pens, paper, staples ad other items that a business has to replace regularly

47
Q

Cash outflows

A

All the money that will leave the business in order to pay its fixed ad variable costs

48
Q

Net cash flow

A

The difference between the cash inflows and the cash outflows

49
Q

Net cash flow formula

A

Net cash flow = cash inflows - cash outflows in a given period

50
Q

Opening balance

A

The amount of money in the business’s bank account at the start of any period

51
Q

Opening balance formula

A

Opening balance = closing balance of the previous period

52
Q

Closing balance

A

Amount of money in the bank at the end of each month

53
Q

Closing balance formula

A

Closing balance = opening balance + net cash flow

54
Q

Trade credit

A

A credit arrangement that is offered only to businesses by suppliers

55
Q

Overdraft

A

A facility offered by a bank that allows an account holder to borrow money at short notice

56
Q

Reasons why a business might to take out a short-term loan

A

To help maintain a positive cash flow
Equipment and stock need to be purchased and bills need to paid on time

57
Q

Credit limit

A

The maximum amount of credit that a business has with a financial institution or supplier

58
Q

Credit period

A

Maximum amount of time that a business can take to pay what is owed for a specific month

59
Q

Frequency of payment

A

The frequency with which a business will pay a supplier

60
Q

Method of payment

A

The way in which the business sends the money owed to the supplier

61
Q

Cheque

A

A written order to a bank to pay a amount of money from an account holder’s account to a specified person

62
Q

Retrospective discount

A

A discount applied when the business has purchased a certain number of goods or spent a certain amount of money with a supplier

63
Q

Long-term source of finance

A

One that is designed to be paid back over a much longer period of time than a short-term source of finance

64
Q

Long-term sources of finance

A

Personal savings
Venture capital
Share capital
Loans
Retained profit
Crowdfunding

65
Q

Personal savings

A

Refers to any money that the entrepreneur has saved up, either before starting the business or while they are running the business

66
Q

Venture capital

A

Money to invest in a business is sourced from individuals, or groups of people, who wish to invest their own money into new businesses

67
Q

Return on investment

A

The amount of money that a investor gets back in return for investing in business

68
Q

Shareholders

A

Investors who are part-winners of a company

69
Q

Share capital

A

Money to invest in a business is raised by the business issuing shares that it then sells to those who wish to invest in the company

70
Q

Loan

A

An amount of money lent to an individual or a business that will be paid off with interest over an agreed period of time

71
Q

Credit check

A

A check on the financial status of a business or individual to ensure that the business or the individual has a reliable credit history and does not have any existing outstanding debts

72
Q

Security

A

When the lender asks the borrower to put up an asset, ugh as a house, or valuable item owned by the business

73
Q

Asset

A

Any item of value that a business owns, such as its machinery or premises

74
Q

Guarantor

A

A named person who guarantees to pay the repayments on a loan should the loaner not be able to make the payments

75
Q

Crowdfunding

A

Means that a business obtains funding from a large number of people who each pay a small amount of money to the business

76
Q

Retained profit

A

Money that a business keeps, rather than paying out to its shareholders

77
Q

Reason why a business may set up a credit arrangement with a supplier

A

Allows a business to obtain raw materials and stock but pay for them at a later date

Edexcel GCSE Business (9 decks)

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