Revision

Question 1

Break even graph

Answer 1

Draw

Question 2

Causes of cash flow problems

Answer 2

• low profits

- seasonal demand

Question 3

How to improve cash flow ?

Answer 3

• Keep costs under control

- study cash flow patterns

Question 4

Break even + CPU calculations

Answer 4

Break even- fc/ cpu

Cpu - sp - vc

Question 5

Define batch production

Answer 5

Group similar items together

Question 6

Batch production advantage

Answer 6

• save on economies of scale

- allows unexpected order

Question 7

Batch production disadvantage

Answer 7

• tasks become boring / repetitive

- takes time to switch from one batch to another

Question 8

flow production definition?

Answer 8

Continuous movement

Question 9

Advantages of flow production

Answer 9

• large quantities of output

- less labour so less training

Question 10

Disadvantage of flow production

Answer 10

• long machine set up time

- if flow stop then production is slow/ shit down

Question 11

Define job production

Answer 11

Tailored to customer specifications

Question 12

Advantages of job production

Answer 12

• high quality

- employee more motivated

Question 13

Disadvantage of job production

Answer 13

• rely on high skill

- labour intensive

Question 14

Define break even point

Answer 14

Making neither profit or loss

Question 15

Margin of safety calculation

Answer 15

Actual output - break even output

Question 16

Negatives of break even ?

Answer 16

• assume business sell all products at same price

- variable costs change regularly

Question 17

Sources of finance- short term

Answer 17

• overdraft

- trade credit

Question 18

Sources of finance- long term?

Answer 18

• venture capital
• share capital
• bank loans
• retained profit
• crowed funding

Question 19

Name 3 external sources of finance (debt)

Answer 19

• bak loans
• overdraft
• trade credit
• crowd funding

Question 20

Name 2 long term external sources of finance

Answer 20

• shares

- long term bank loans

Question 21

Name 2 medium term external SOF

Answer 21

• leasing

- hire purchase

Question 22

Name 2 short term external SOF

Answer 22

• overdraft

- bank loan

Question 23

Define venture capital

Answer 23

Invest in high risk businesses

Question 24

One pos and neg of venture capital

Answer 24

+ help managing risk is provided

- founder stake reduced

Question 25

Define overdraft

Answer 25

• short term lending by bank of small amount of money

Question 26

Why would a business want to use an overdraft ?

Answer 26

Hep with short term cash flow

Question 27

Is overdraft debt or equity?

Answer 27

Debt

Question 28

Advantages of overdraft

Answer 28

• Flexible

- security not required

Question 29

Disadvantage of overdraft

Answer 29

• high interest rates

- banks can demand immediate repayment

Question 30

Define Trade credit

Answer 30

B2B transaction but doesn’t pay for them. Creditor issue invoice

Question 31

Why business want use trade credit?

Answer 31

Cash flow. Pay in 30,60, 90 days

Question 32

Is trade credit debt or equity?

Answer 32

Debt

Question 33

Advantages of trade credit

Answer 33

• Business never run out of products to sell

- business sell products THEN pay back

Question 34

Disadvantage of trade credit

Answer 34

• supplier Charge high for products because of credit arrangement

Question 35

Use of cash flow forecast

Answer 35

• monitor chase in and out business

Question 36

Problems with cashflow

Answer 36

• only 12 m/o snapshot

Question 37

How to deal with cash flow problems

Answer 37

• reduce expenses

- delay paying bills ( trade credit)