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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
purpose of variances
sets budgets motivation manipulation
26
formula for: gross profit operating profit net profit
gross profit=revenue-cost of sales (TC) operating profit=gross profit-operating expenses net profit=operating profit-interest (&exceptional costs)
27
ways of measuring profitability
gross profit margin=gross profit/revenue x100 operating profit margin=operating profit/revenue x100 net profit=net profit before tax/revenue x100
28
improving profitability
raise prices | lower costs
29
what are current and non-current assets
current assets- assets which can be changed into cash within 12 months non-current assets- long term resources that will be used repeatedly
30
what are current and non-current liabilities
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
what is liquidity
the ease at which assets can be converted into cash
32
what are the formulas for measuring liquidity
current ratio=current assets/current liabilities | acid test ratio=current assets-inventories/current liabilites
33
how can you improve liquidity
negotiate short-term/long-term loans | encourage cash sales and sell of assets
34
what are the internal causes of business failure
lack of planning cash-flow problems failure to innovate
35
what are the external causes of business failure
competition changes in consumer tastes economic conditions
36
what are the financial causes of business failure
bankruptcy | becoming insolvent
37
what are the non-financial causes of business failure
failure to meet customers needs | inability to compete effectively
38
what is job production? | what are the pros and cons of job production
``` production of a single product at a time +high quality +workers are motivated -high labour costs -slow production ```
39
what is batch production? | what are the pros and cons of job production
``` 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
what is flow production? | what are the pros and cons of job production
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
what is productivity?
amount of output produced with a given input of resources
42
what is the formula for capital productivity?
capital employed/output
43
what are the factors influencing productivity
division of labour education and training motivation
44
what are the factors influencing efficiency?
outsourcing delayering JIT production
45
what is a labour intensive workforce? | what are the pros and cons
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
what is a capital intensive workforce? | what are the pros and cons?
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
what are the different components of stock?
raw materials work-in-progress finished goods
48
what are the factors of stock control?
demand cost of stock holding type of stock
49
what are the effects of poor stock control (too much)
costs of storage opportunity cost poor liquidity
50
what are the effects of poor stock control (too little)
cannot cope with sudden increases in demand | can run out of stock with delivery delays
51
what are the implications of JIT management
+improves cash-flow +cost of stock holding in reduced -difficult to cope with sudden increases in demand -advantages of bulk buying lost
52
what is capacity utilisation?
the use a business makes of its resources
53
what is the formula for capacity utilisation?
current output/maximum possible output x100
54
what is underutilisation? | what are the implications of underutilisation
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
what is overutilisation? | what are the implications of overutilisation
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
ways of improving capacity utilisation
reduce capacity increase sales outsourcing
57
what is quality control?
making sure the quality of a product meets specified quality performing criteria
58
what is quality assurance?
a method that takes into account customer's wants when standardising quality. It aims to maintain quality throughout the production process
59
what are quality circles?
small groups of workers who meet regularly to study and solve problems
60
what is TQM?
Total quality management is a method deigned to prevent errors
61
what is the Kaizen approach?
continous improvement eliminating waste PDCA (plan, do, check, action)

Business (4 decks)

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