Putting a business idea into practice Flashcards
What are aims?
general goals that a business sets
What are objectives?
specific steps to achieving aims
What are some financial objectives for startups?
- survival
- sales and sales revenue
- profit
- market share
- financial security
What are some non-financial objectives for startups?
- personal satisfaction
- independence and control
- challenge
- social benefits or goals
- customer satisfaction
- business rewards and recognition
What are some business objectives for larger companies?
- becoming a market leader
- globalisation
- higher sales revenue
- donating to charities or other causes
Fixed costs:
do not vary with the output produced
Variable costs:
change directly with the number of products made
How is profit an objective to businesses?
- survival
- reinvestments
- provides security and savings
- reward employees
- generate wealth for the owner
Break even:
the level of output at which a business’s revenue covers it’s total costs
Total revenue:
amount of money earned by a business
Total costs:
sun of al costs at any level of output
The margin of safety:
how much the business could fall before the business starts to make a loss
Cash flow forecast:
predicts the money flowing in and out of a business over time
Without sufficient cash a business would become?
insolvent
If a business becomes insolvent this means it would be unable to:
- pay its suppliers and other debts
- repay bank loans
- pay wages to employees
- buy raw materials and products to sell
- promote the business
What impacts cash flow?
- change in sales revenue and demand
- change in costs
- seasonality in sales
- business expansion or contraction
- change in stock levels
- changing credit terms
What are some reasons business may need a new source of finance?
- paying for expenses
- expanding the business
- investments
- starting a new business
- paying for any unseen costs
Short term source of finance:
repaid immediately or very quickly
Long term sources of finance:
repaid over long periods of time
Some short term sources of finance are?
- bank overdrafts
- trade credit
Some long term sources of finance are?
- personal savings
- venture capital (raising capital from investors)
- share capital (selling equity in a limited company)
- loan
- retained profit
- crowd funding
