Theme 1 Flashcards
Net cash flow
Cash inflow - cash outflow
Opening balance
Closing balance of previous period
Closing balance
Opening balance + net cash flow
Interest (on loans)
Total repayment - borrowed amount / borrowed amount
X100
Profit/ Loss
Total revenue - total costs
Break-even output
Fixed costs/
Sales price - variable cost
Margin of safety
Actual~ budgeted sales - break even in sales
Revenue
Price x quantity
Total costs
T fixed costs + T variable costs
What are the three reasons why business ideas come about
1) changing consumer needs
2) changing technology
3) obsolescence
Two ways in which new business ideas come about
1) Invention
2) Innovation
Definition of risk
The possibility that an enterprise will have lower than anticipated profits or experience a loss
Definition of Reward
The achievement that an entrepreneur/ investor receives when a business succeeds
Three ways risk can impact a business
1) Business failure (e.g. fall in sales)
2) Financial loss (e.g lose belongings)
3) Lack of security (e.g. self employed)
Three ways reward impacts a business
1) Business success (e.g. personal satisfaction)
2) Profit
3) Independence
Definition of enterprise
A person/ organisation with the purpose of producing goods and services
Definition of Entrepreneur
A person who starts a business despite the risks
Three roles/ purposes of a business
1) Purchase from suppliers
2) Produce goods or services
3) Sell to customers & make a profit
5 ways a business can add value
USP Branding Better design Convenience Quality
Roles of an entrepreneur
1) To provide goods / services
2) To make a profit
3) Identify opportunities
+ show initiative
+ be innovative
The 4 customer needs
1) Price
2) Quality
3) Choice
4) Convenience
4 reasons for carrying out market research
1) Reduce risks in business decisions
2) Identify gaps in the market
3) Identify and understand customer needs
4) Identify and understand competitors
Primary research
Collecting info first hand
Secondary research
Collecting data second-hand
