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Business Studies > Putting a business idea into practice > Flashcards

Putting a business idea into practice Flashcards

1
Q

What is the difference between a business aim and a business objective?

A

A business aim is the overall target, while objectives are the specific steps to reach that aim.

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2
Q

What is an example of a business aim?

A

To make £120,000 profit.

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3
Q

What is an example of a business objective?

A

To make £10,000 profit each month for the next year.

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4
Q

Business objectives are often created using the SMART acronym: What does SMART stand for?

A

Specific, Measurable, Agreed, Realistic, Time-bound.

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5
Q

Why are business aims and objectives important?

A

They provide direction and a purpose, helping businesses stay focused and on track.

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6
Q

What are financial aims and objectives?

A

They are goals related to money, ensuring the business survives and makes a profit.

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7
Q

What is an example of a financial aim?

A

To make a profit within the first two years.

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8
Q

What does business survival mean as a financial objective

A

It means keeping the business running, especially in its first year.

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9
Q

Why is profit an important financial objective?

A

It is the money left after costs, helping the business to grow and reinvest.

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10
Q

What is market share?

A

It is the percentage of the market that a business occupies within its industry.

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11
Q

What is financial security for a business?

A

It means being able to cover costs and have enough income to continue operations.

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12
Q

What are non-financial aims and objectives?

A

They are goals unrelated to making money, often linked to personal reasons for starting a business.

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13
Q

What is a social objective in business?

A

A goal related to ethical practices, sustainability, or addressing social needs.

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14
Q

How does personal satisfaction play into non-financial aims?

A

Entrepreneurs may feel fulfilled by creating a successful business, especially if it aligns with their personal interests.

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15
Q

What does the aim of ‘challenge’ involve for an entrepreneur?

A

Setting up a business to push personal limits and step out of their comfort zone.

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16
Q

What does ‘control’ mean as a non-financial aim?

A

The entrepreneur wants to make all key business decisions and run the business according to their own vision.

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17
Q

Why is independence an important non-financial aim?

A

It involves working for oneself and making all key decisions independently.

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18
Q

Why do aims and objectives differ between businesses?

A

They differ because businesses operate in different sectors and have varying sizes and scales.

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19
Q

How does a business sector impact its aims and objectives?

A

Different sectors require different goals. For example, a restaurant may aim to offer a variety of pizzas, while a florist would have different goals.

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20
Q

How does the size of a business influence its aims and objectives

A

A new business might focus on survival, while an established business may aim for profit. Smaller businesses may focus on expanding their operations.

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21
Q

What is the break-even point (BEP)?

A

It’s when a business’s revenue equals its total costs, meaning no profit or loss.

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22
Q

How is the break-even point calculated?

A

Break-even = Fixed costs ÷ (Selling price − Variable costs)

23
Q

What happens when a business experiences an increase in revenue?

A

the business is likely to see increased profits, surpass the break-even point, and have a higher margin of safety, as long as costs remain the same or decrease.

24
Q

What happens if a business experiences a decrease in revenue?

A

The business risks not breaking even and may face lower profits. If costs are also decreasing, the impact might be neutral.

25
Q

How do increasing costs affect a business?

A

Increasing costs can raise the break-even point and reduce profits. The business must either absorb the costs or raise prices to pass the cost on to customers, which could risk a loss.

26
Q

What impact do decreasing costs have on a business?

A

Decreasing costs are positive for the business, as they lower the break-even point and can increase profits. If the business passes the savings to customers, they may expect lower prices.

27
Q

What can cause cash flow problems?

A

Problems can arise when large customers fail to pay on time or when the business experiences high start-up costs or rapid growth.

28
Q

Why is cash flow important for a business?

A

Cash flow is important because it ensures the business can pay its bills, suppliers, and employees, and avoid financial difficulties.

29
Q

What is negative cash flow?

A

Negative cash flow occurs when more money is going out of the business than coming in, which can lead to insolvency.

30
Q

How can a business improve its cash flow?

A

A business can improve cash flow by negotiating an overdraft facility, keeping costs under control, and managing credit arrangements with suppliers and customers.

31
Q

what is cash flow?

A

The movement of cash in and out of the business.

32
Q

what is Cash Flow Forecast

A

A prediction of future cash inflows and outflows.

33
Q

What is the difference between cash and profit?

A

Cash is the money coming into the business, while profit is the amount left after all costs have been deducted.

34
Q

Why is cash flow forecasting important for a business?

A

It helps businesses plan for the future, make decisions, and identify potential risks like negative cash flow.

35
Q

What challenges might a new business face when forecasting cash flow?

A

New businesses don’t have past data, so they have to make estimates and carefully monitor actual cash flow to adjust their forecasts.

36
Q

What do cash inflows and outflows include?

A

Inflows include sales revenue, loans, and rent received. Outflows include payments to suppliers, employees, and overhead costs.

37
Q

What is short-term finance used for?

A

It helps businesses maintain positive cash flow, especially during poor cash flow periods or when payments are delayed.

38
Q

What is an overdraft?

A

An overdraft is a loan from a bank that allows a business to withdraw more money than it has in its account, with interest charged on the borrowed amount.

39
Q

Why should businesses be careful with overdrafts?

A

Overdrafts can be expensive due to high-interest rates and banks can demand full repayment at short notice.

40
Q

What is trade credit?

A

Trade credit allows businesses to get raw materials or stock from suppliers and pay later, usually within 30, 60, or 90 days.

41
Q

What are the main terms of a trade credit agreement?

A

It includes credit limits, credit period, payment frequency, and payment methods.

42
Q

How does trade credit help with cash flow?

A

It allows businesses to sell products before having to pay for the materials, easing cash flow.

43
Q

What is a retrospective discount in trade credit?

A

A discount given to businesses for purchasing a certain amount of stock or raw materials.

44
Q

What is personal savings as a source of finance?

A

It is money saved by the entrepreneur and used to fund the business, with no interest charges involved.

45
Q

What is venture capital?

A

Venture capital is money invested by individuals or groups willing to take a risk in exchange for a share of the profits and some control over the business.

46
Q

What is share capital?

A

Share capital is money raised by selling shares to shareholders, giving them ownership and rights in the business.

47
Q

Advantages of share capital?

A

It provides permanent capital, and there are no dividend payments if the business has a poor year.

48
Q

Disadvantages of share capital?

A

It dilutes control for the founders and makes the business vulnerable to takeover if too many shares are sold

49
Q

What is a bank loan?

A

A bank loan is money lent to a business, paid back with interest over an agreed period. It often requires assets as security.

50
Q

What is retained profit?

A

Retained profit is the money a business reinvests from its own profits, without incurring interest or needing to pay dividends.

51
Q

What is crowdfunding?

A

Crowdfunding is when a large number of people invest small amounts of money online to fund a business.

52
Q

Advantages of crowdfunding?

A

It provides market research and offers opportunities for individuals to start businesses without other funding sources

53
Q

Disadvantages of crowdfunding?

A

The business idea must be appealing, and it can be difficult to reach the funding target.

Business Studies (10 decks)

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