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Business > theme 2 > Flashcards

theme 2 Flashcards

1
Q

types of internal finance

A

retained profit
owners capital
sale of assets

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2
Q

implications of internal finance

A

+available immediately
+cheap- no interest costs
-opportunity costs
-can be inflexible

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3
Q

sources of external finance

A

family&friends
banks
business angels

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4
Q

methods of external finance

A

bank loans
share capital
overdraft
mortgages

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5
Q

what is limited liability

A

where a business has a separate legal entity to its owners

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6
Q

implications of limited liability

A

+owners private assets are protected

+easier to raise finance

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7
Q

appropriate finance for limited liability

A

share capital
business angels
retained profit

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8
Q

what is unlimited liability

A

where the owners are responsible for business debts

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9
Q

implications of unlimited liability

A
  • can be forced to sell private assets for cash

- liable for any unlawful acts committed by owners/employees

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10
Q

appropriate finance for unlimited liability

A

personal savings
mortgages
crowd funding

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11
Q

implications of cash-flow forecasting

A

+identifies timings of cash shortages/surpluses
+monitors cash-flow
-based on estimates
-subject to external forces

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12
Q

what are the factors affecting sales forecasting

A

consumer trends
seasonal variations
economic variables
competitor actions

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13
Q

benefits of sales forecasting

A

inform cash-flow forecasting
helps plan for ordering supplies
plan for correct staffing levels

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14
Q

formula for sales revenue

A

price x quantity

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15
Q

what are fixed costs

A

costs which stay the same at all output levels

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16
Q

fixed costs examples

A

rent
insurance
heating bills

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17
Q

what are variable costs

A

costs which rise as output rises

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18
Q

variable costs examples

A

raw materials
fuel
wages

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19
Q

formula for total cost

A

fixed cost + variable costs

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20
Q

formula for profit

A

total revenue - total costs

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21
Q

difference between short run and long run

A

short run- at least one factor of production is fixed

long run- all factors can vary

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22
Q

types of budgets

A

sales budgets- firms planned sales of a future period of time
production cost budget- firms planned production cost for a future period of time
zero-based budget- where no money is allocated for costs

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23
Q

purpose of budgets

A

preparation of plans

analysis of variances

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24
Q

what does variance mean

A

the difference between the figure the business had budgeted for and the actual figure

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25
Q

purpose of variances

A

sets budgets
motivation
manipulation

26
Q

formula for:
gross profit
operating profit
net profit

A

gross profit=revenue-cost of sales (TC)
operating profit=gross profit-operating expenses
net profit=operating profit-interest (&exceptional costs)

27
Q

ways of measuring profitability

A

gross profit margin=gross profit/revenue x100
operating profit margin=operating profit/revenue x100
net profit=net profit before tax/revenue x100

28
Q

improving profitability

A

raise prices

lower costs

29
Q

what are current and non-current assets

A

current assets- assets which can be changed into cash within 12 months
non-current assets- long term resources that will be used repeatedly

30
Q

what are current and non-current liabilities

A

current liabilities- money owed by a business which must be repaid within 1 year
non-current liabilities- long term loans which do not have to be repaid within 1 year

31
Q

what is liquidity

A

the ease at which assets can be converted into cash

32
Q

what are the formulas for measuring liquidity

A

current ratio=current assets/current liabilities

acid test ratio=current assets-inventories/current liabilites

33
Q

how can you improve liquidity

A

negotiate short-term/long-term loans

encourage cash sales and sell of assets

34
Q

what are the internal causes of business failure

A

lack of planning
cash-flow problems
failure to innovate

35
Q

what are the external causes of business failure

A

competition
changes in consumer tastes
economic conditions

36
Q

what are the financial causes of business failure

A

bankruptcy

becoming insolvent

37
Q

what are the non-financial causes of business failure

A

failure to meet customers needs

inability to compete effectively

38
Q

what is job production?

what are the pros and cons of job production

A 
production of a single product at a time
\+high quality 
\+workers are motivated
-high labour costs
-slow production
39
Q

what is batch production?

what are the pros and cons of job production

A 
completing one operation at a time on all units before performing the next
\+workers likely to specialise
\+unit costs are lower
-careful planning needed 
-less motivation
40
Q

what is flow production?

what are the pros and cons of job production

A

large scale production of a standard product, where each operation on a unit is performed continuously, usually on a production line
+low unit costs due to economies of scale
+output produced quickly
-breaks in production very expensive
-low worker motivation

41
Q

what is productivity?

A

amount of output produced with a given input of resources

42
Q

what is the formula for capital productivity?

A

capital employed/output

43
Q

what are the factors influencing productivity

A

division of labour
education and training
motivation

44
Q

what are the factors influencing efficiency?

A

outsourcing
delayering
JIT production

45
Q

what is a labour intensive workforce?

what are the pros and cons

A

a production technique involving using more labour than capital production
+more flexible
+people are creative therefore solve problems and make improvements
-people are unreliable
-need breaks, motivation, holiday

46
Q

what is a capital intensive workforce?

what are the pros and cons?

A

a production technique involving using more capital than labour production
+more cost-effective if large quantities are produced
+can operate 24/7
-huge delays if machines break
-can be inflexible-machines are specific

47
Q

what are the different components of stock?

A

raw materials
work-in-progress
finished goods

48
Q

what are the factors of stock control?

A

demand
cost of stock holding
type of stock

49
Q

what are the effects of poor stock control (too much)

A

costs of storage
opportunity cost
poor liquidity

50
Q

what are the effects of poor stock control (too little)

A

cannot cope with sudden increases in demand

can run out of stock with delivery delays

51
Q

what are the implications of JIT management

A

+improves cash-flow
+cost of stock holding in reduced
-difficult to cope with sudden increases in demand
-advantages of bulk buying lost

52
Q

what is capacity utilisation?

A

the use a business makes of its resources

53
Q

what is the formula for capacity utilisation?

A

current output/maximum possible output x100

54
Q

what is underutilisation?

what are the implications of underutilisation

A

where a business is producing at less than full capacity
+able to cope with sudden increases in demand
+less work-related stress
-operating inefficiently

55
Q

what is overutilisation?

what are the implications of overutilisation

A

where a business is running at full capacity
+average costs will be lower
+good staff motivation- job security
-strain on staff/resources
-may not be able to cope with increased demand

56
Q

ways of improving capacity utilisation

A

reduce capacity
increase sales
outsourcing

57
Q

what is quality control?

A

making sure the quality of a product meets specified quality performing criteria

58
Q

what is quality assurance?

A

a method that takes into account customer’s wants when standardising quality. It aims to maintain quality throughout the production process

59
Q

what are quality circles?

A

small groups of workers who meet regularly to study and solve problems

60
Q

what is TQM?

A

Total quality management is a method deigned to prevent errors

61
Q

what is the Kaizen approach?

A

continous improvement
eliminating waste
PDCA (plan, do, check, action)

Business (4 decks)

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