THEME 1: 1.3 Flashcards
What is meant by the aim of a business?
Overall goals the business wants to achieve.
State 5 financial aims a business may have.
Survival - business has enough money to stay open
Maximise profit - increase capital
Increase market share - what percentage of the markets total sales a product or company has made
Maximise Sales - how many of a particular product it sells
Financial Security - depends on its own revenue to fund its activities
State 4 non financial aims a business might have.
accomplishing a personal challenge, personal satisfaction, independence and control and doing whats right for society.
What is meant by a business objective.
Measurable steps the business needs to take to achieve the total aim.
Suggest how aims /objectives may differ between businesses in a competetive market compared to businesses in a non competetive one.
Highly competetive - survival and maximising sales
Non competetive - increasing market share and maximising profits
state the equation for calculating a business revenue.
quantity sold x price
describe the difference between fixed and variable costs.
fixed costs don’t vary with output (how much the business produces) such as rent on a physical store. Variable costs increase as the firm expands output such as the raw materials needed to make a product.
Find the total variable costs for a firm if it sells 450 units with a variable cost of £3 per unit.
3 x 450 = 1350 pounds of variable costs.
Write the equation for calculating the percentage interest a firm has paid on a loan.
total repayment - borrowed amount / borrowed amount x 100
A firms total revenue is £250,000 and has total costs of £100,000. State whether the firm has made a profit or loss.
£250,000 - £100,000 = £150,000 profit
What is the break even output.
level of sales/output a firm needs in order to just cover its costs.
Whats the equation for break even output.
fixed costs / sales price - variable costs per unit
What is the margin of safety on a break even diagram.
the gap between the current level of output and the break even output.
What is meant by cash?
the money the company can spend immediately
what is meant by net cash flow?
cash inflows - cash outflows for a given period of time.
how do you calculate the closing balance for a period on a cash flow forecast.
opening balance (bank balance at start of month) + net cash flow
Describe how credit can affect cash flow for a business.
tells you how long after agreeing to buy a product the customer has to pay which can effect business cash flow. If the customer pays immediately then the business only needs extra finance for one month whereas if they have two months credit the business will need to arrange extra finance for 3 months.
Give one disadvantage of using an overdraft compared to other forms of borrowing.
usually have higher interest rates than other loans, bank can stop it at anytime and if its not paid the bank can take some of the businesses assets.
Describe what is meant by share capital.
individuals can buy shares of a business. They have part ownership and can use the money gained through issuing shares.
What does retained profit mean?
profits the owners have reinvested in the business after they’ve paid themselves a dividend.
