Revision Flashcards
Evaluate the importance of detailed planning in reducing start up risks
- Cut cost of material
- Less issue of lanch, no manfantion
- Planning reduces risk
Source of finances to cover start-up cost
- Bank loans
- Individual investors called venture capital
- Parent (may not have to pay back )
Venture
project/ business
Role of a venture capitalist
Provide capital, provide mentoring and support - in return of money back in form of royalties.
Legislation
These are the rules or laws made by the government. These laws set guidelines and regulations for how individuals, businesses, and organizations must act in society. (such as employment, trade, taxes, and financial regulation)
Interest is
This is the extra money you pay when you borrow money or the extra money you earn when you save money. It’s usually a percentage of the amount.
The three factors that are most likely to affect interest rates are:
- Changes to exchange rate: Exchange rates can influence monetary policy and interest rates.
- Changes to inflation: Central banks adjust interest rates to control inflation.
- Changes to legislation: New laws can directly or indirectly influence financial markets.
How to calculate the interest rate
Interest Rate=( Principal Amount Borrowed/Interest )×100
Entrepreneurial qualities
Creativity
Risk taking
Good decision making
Passion
Planning
Open minded
Knowledge
What is a venture capitalist?
Investor
What is in dependence?
Being your own boss
What is financial risk?
The possibility of losing money or not achieving expected financial returns.
What is a gap in the market?
Missing product or service that is yet to be made ( + no competition)
Explain the difference between a good and a service.
Goods are tangible and services are intangible.
Is a sport package a product or a service
A service
Rewards
- Take holidays at any time
- Sense of satisfaction
- Flexibility
- To be able to work from home
- Learn about business
- Work-life balance
Why new business ideas come about:
- Changes in technology
- Changes in what consumers want
- Products and services becoming obsolete
How new business ideas come about:
- Original ideas
- Adapting existing products/services/ideas
A service
is an act that a business person carries out for you in exchange for money
A product
is anything that is capable of satisfying customer needs
Invention
Creating something from scratch (made by yourself).
Innovation
Improving pre- existing products.
Obsolete
a product or service that is no longer used or that is out of date
Original ideas
ideas that have not been used before to put a product or service into production
The impact of risk and reward on business activity:
- Risk: business failure, financial loss, lack of security
- Reward: business success, profit, independence
An entrepreneur
a person who is prepared to take a risk in the hope of gaining a reward
Business risk
risk that may lead to failure to achieve the goals of the organisation, for example to not make a profit
Business failure
when a business ceases to trade or when a business does not trade in a profitable way or when a business makes a terrible decision.
Risks
Cyber attacks
Economic problems
Poor reputation
Employment laws
Change in tastes and trends
Cash flow problems
Natural disasters
Failure to plan
Staff training
Operational risks
Staff reliability
Commercial risks
The role of business enterprise and the purpose of business activity:
*To produce goods or services
* To meet customer needs
* To add value: convenience, branding, quality, design, unique selling points
Explain one reason why new business ideas come about.
Consumer want something new -> products may not meet customers need -> gap in market
Change in technology -> new products -> look to create that new products
The role of entrepreneurship:
An entrepreneur: organises resources, makes business decisions, takes risks
Explain one way an entrepreneur might identify a new business idea.
Original idea -> knowledge of market-> no competition
Innovation -> improve product -> interested customers
What are the five things that businesses can compete on?
Price, quality, location, product range and customer service
What does ‘margin of safety’ mean?
The number of sales a business can lose before it reaches its break-even point
What does ‘break even level of output’ mean?
The number of sales the business needs to make to not make a profit or loss
What is the break-even formula?
Break even = Total fixed costs / (Selling price per unit - variable cost per unit)
Name the five non-financial objectives
Social objectives, personal satisfaction, challenge, independence and control
What is the formula for working out interest on loans?
Interest in % = ((total repayment - borrowed amount) / borrowed amount) x 100
What is interest?
The reward for saving, or the cost of borrowing money
What is the profit formula?
Profit = Revenue - costs
What is the ‘total variable cost’ formula?
Total variable costs = Variable cost x quantity made
Define revenue
Money received from sales
Define variable costs
Costs that do change with output e.g. raw materials
Name the five financial objectives
Survival, profit, sales, market share, financial security
What is the ‘total cost’ formula?
Total costs = Total fixed costs + Total variable costs (TC = TFC + TVC)
What is the revenue formula?
Revenue = Sales price x quantity
Define fixed costs
Costs that do not change with output e.g. rent
Differents between goods and products
Goods” specifically refers to tangible items or merchandise, while “products” can encompass a broader range, including both tangible and intangible items
