Revision Flashcards
Break even graph
Draw
Causes of cash flow problems
- low profits
- seasonal demand
How to improve cash flow ?
- Keep costs under control
- study cash flow patterns
Break even + CPU calculations
Break even- fc/ cpu
Cpu - sp - vc
Define batch production
Group similar items together
Batch production advantage
- save on economies of scale
- allows unexpected order
Batch production disadvantage
- tasks become boring / repetitive
- takes time to switch from one batch to another
flow production definition?
Continuous movement
Advantages of flow production
- large quantities of output
- less labour so less training
Disadvantage of flow production
- long machine set up time
- if flow stop then production is slow/ shit down
Define job production
Tailored to customer specifications
Advantages of job production
- high quality
- employee more motivated
Disadvantage of job production
- rely on high skill
- labour intensive
Define break even point
Making neither profit or loss
Margin of safety calculation
Actual output - break even output
Negatives of break even ?
- assume business sell all products at same price
- variable costs change regularly
Sources of finance- short term
- overdraft
- trade credit
Sources of finance- long term?
- venture capital
- share capital
- bank loans
- retained profit
- crowed funding
Name 3 external sources of finance (debt)
- bak loans
- overdraft
- trade credit
- crowd funding
Name 2 long term external sources of finance
- shares
- long term bank loans
Name 2 medium term external SOF
- leasing
- hire purchase
Name 2 short term external SOF
- overdraft
- bank loan
Define venture capital
Invest in high risk businesses
One pos and neg of venture capital
+ help managing risk is provided
- founder stake reduced
Define overdraft
- short term lending by bank of small amount of money
Why would a business want to use an overdraft ?
Hep with short term cash flow
Is overdraft debt or equity?
Debt
Advantages of overdraft
- Flexible
- security not required
Disadvantage of overdraft
- high interest rates
- banks can demand immediate repayment
Define Trade credit
B2B transaction but doesn’t pay for them. Creditor issue invoice
Why business want use trade credit?
Cash flow. Pay in 30,60, 90 days
Is trade credit debt or equity?
Debt
Advantages of trade credit
- Business never run out of products to sell
- business sell products THEN pay back
Disadvantage of trade credit
- supplier Charge high for products because of credit arrangement
Use of cash flow forecast
- monitor chase in and out business
Problems with cashflow
- only 12 m/o snapshot
How to deal with cash flow problems
- reduce expenses
- delay paying bills ( trade credit)
