Theme 2 revision - overview of unsure topics Flashcards
What is limited liability
Business owner is only liable for their original investment if the businesses into debt
What is unlimited liability
If the business has debts the owner must pay even if this means selling their own possessions
In what businesses would limited liability be experienced
PLC and LTD
In what businesses would unlimited liability be experienced
Sole trader and partnerships
What are methods of finance for a limited liability business
Retained profits, sale of assets, shares, hire purchase and leasing, trade credit, government grants, venture capital, bank loan, debentures (loan given in which interest is used to pay the full loan back by an agreed date
What are methods of finance For an unlimited liability business
Private investors, credit cards, crowdfunding, trade credit, owners savings, overdraft
What is a venture capital
Capital invested into a business in return for shares (equity) rather than as a loan, requiring a higher rate of return than a loan to compensate for their risk
What are the pros of a business plan
Persuade lenders that profit is high enough to repay loans, attract potential investors, give owners some direction, set SMART targets, identify any problems early on
What are the cons a business plan
Information can go out of date quickly, mainly estimates and assumptions, can be subjective
How do you calculate net cash flowing a sales forecast
Inflows - outflows
What is the formula for closing balance
Closing balance = opening balance + net cash flow
How do you find the opening balance in a sales forecast
The closing balance of the previous month
If the price of a good increases, what happens to the demand on a supply and demand graph
Decreases, shifts to the left
What factors affect sales forecasting
Historical data, seasonality, demand changes
What is the formula for revenue
Revenue = selling price x quantity demanded
