Theme 2 Flashcards
Owner capital
=equity
Venture capital
Source of finance
This is where the finance has come from
Method of finance
This is the use of finance - or what use it would be suitable -eg loan to buy a computer
Limited liability
Unlimited liability
Debts that the business owes means that the owner must pay even by give up their home etc
Sales volume
How many goods have been sold
Sales revenue
How much money has been made
Selling price
How much is the price for each item sold
Sv=sr/sp
Sales volume = sales revenue/selling price
Gross profit
Sales revenue - cost of sales =gp
Operating profit
Gross profit - expenses = op
Net profit
Operating profit - interest =np
Why do ltds need to share their stats at the end of their
The business need to be transparent because legally the business is not the owners business
Profit
Profit is recorded straight away
A business can trade many years without profit
To improve a business profit either they need to reduce costs or increase revenue
Cash
Cash will not be recorded until it is paid out or revived which could be in a different trade year
A profitable business may go bust of it runs out of cash to pay a supplier or wages of staff
If owners introduce cash via savings or a loan this will not affect the profit figure
Cash
Cash is liquidity at a business disposable
Liquidity
The ability of a business to turn its assists into cash to pay it current liabilities
Economic influence
When a business is affected in any way by economic factors eg inflation
Inflation
The inflation rate is the rise in the price of goods in the UK economy
Business failure
When a business ceases to trade or when a business does not trade in a profitable way
Internal causes of business failure
Poor efficiency
Poor marketing
Failure to innovate
Bad management of working capital
4 Business areas of focus
Finance
Human Resources
Operations
Marketing
Sic
Sales
Image
Costs
Productivity
Output per unit of input per time period
Methods of production
Job
Batch
Flow
Cell
Job production
When one singular product is made at a time (specific customer )
Process can be long and also more pricey
Batch production
This is the production method used when a business wants to make more than one item at a time
Flow production
Flow production uses production lines with continuous movements of items through the process ( for mass produced products )
Cell production
a manufacturing system where the workforce is divided into self-contained teams designed to complete a particular manufacturing process or product.
Four ways to improve productivity
Productivity bonus
Productivity deal
Staff training
Investment in new machinery and equipment
Benefits and cons of more efficient employees
Lead to competitive advantage as prices per item made are lower than competitors
Quality may suffer
Stock control
Raw material
Components
Work in progress
Finished goods
Capacity utilisation formula calculation
Current output/maximum output x100
Calicut under utilisation
Where a company doesn’t use enough of what they own
Implications of under utilisation
Sale of assists
Partial shutdown
Hiring part time instead of full time
Can mean refundices
Cl
Implactions of under utilisation (good)
Have more time to train staff
Able to accept a non standard order
Have time to maintain
Impalictions of over utilisation
Can damage reputation of the business
Quality suffers as mistakes are made in production
No time Martian machinery or train staff
Competitive advantage
A feature that gives one business and over its rivals
Comptivness
The extent to which a firm can stand up to
Stockholding cost
The overheads resulting from the stock levels held by firm
Buffer stock
The desired minimum stock
Quality assurance
How a business can design the way the product of service is produced or delivered to minimise the chances that output will be sub started
Quality control
Checking the product after it is made and detecting a faulty outputs and getting rid of them
Total quality management
Approach change in business culture that puts quality at the heart of everything in the business
Kaizen
Continuous improvement
Impacts of quality
Quality circle
A group of employees who meet on a regular basis to talk about quality problems
Purpose of sales forecasts
Avoid cash flow problems
Frees up management
Production capacity
Employ more workers
Start promotional activity
Factors affecting sales forecasts
Consumer trends
Economic variables
actions of competition
Disadvantages of scales forecasts
No guarantee
Dynamic markets
Short term thinking
Break even
Is the point which total revenue equals total costs
Contribution
The amount that each unit produced contribut3s towards the fixed costs of the business
Purposes of budgets
Planning
Forcatsing
Communication
Motivation
