share capital Flashcards
what is it
money raised by selling shares in business
adv-money does not need to be repaid
adv-new shareholders can bring in additional expertise into a business
dis-orignial owner no longer owns all of the business
dis-shareholders expect to get share of profits through dividends
venture capital
can be provided by buisness angeks or profesiional employye working on behalf of a venture caital firm
dis-have to give up a share of business and sometimes they want big say in how business is run
adv-may benefit from exert advice
adv-do not need to be repaid
limited liability
owners are only responsible for losing amout they invest into business
e.g public and privat limited companies
unlimited liabitlity
resposinble for all debts of business
can risk losing personal assets e.g house
e.g sole traders and partnerships
business plan
plan of what business wants to achive and how they are going to achieve it
conist of aims and objectives,cash flow frecastes, stament of comprehensive income etc
adv of business plan
potential investors can see business has done its research, more liekly to invest into business
shows how profitbae busienss expects to be, investors can see whenthey should recive returns on ivetsment
cash flow forecasts
sho cash nflows (revived by business) cash outflow (money paid out by buisness)
adv of cash flow forecasts
ensures they have enouh working capital to run their business from day to day and pay their emplyees
aloows them to see when is most liekly they will lose cash meaning can provide a loan or overdraft in time
dis of cash flow forecasts
hard for nw business who just set up
dynamic market where cash is constantly chnaging due to changes in demand
research adn experinece
ner cash flow
cash inflows-cash utflows
closing balance=opening balance plus net cash flow
sales forcast
predict sales volume and sales revenue based on past sales data
what can sales foercast help tell you
makreting-if sales are found t dcline, may tehn launch new campigns to gain sales
finance
resources-asssaures firm has all resources its needs so can meet predicted demand
what are the 3 factors affecting sales forecasts
consumer trends-if decerease in demand, fall in sales
economic varibales-chnages in interest rates, inflation and employent levels causing sales to decline or increase depending on how money consumers have
actions of comeptitors-if they launch new product or reduce price down then sales may drop for the compaany
sales volume
number of units sold
sales revenue
value of sales
sales revnue
selling price times sales volume
fixed costs
do not change with output
e.g rent, basic salaries
variable costs
do change with ouput e.g raw material costs, packagining costs
total vairable costs
AVCxqunaitity demanded
break even point
level of sales a business needs to make to cover its costs
profit
total revenue-total costs
break even analsyis
actuak kevel of sales needed to sell to break even
margin of safety
difference betweeen the actual output and break even
break even calucation
total fixed costs divided by contribtuion