TOPIC 1.1.3 PUTTING A BUSINESS IDEA INTO PRACTICE

Question 1

aims

Answer 1

a general statement of where you’re
heading, for example ‘to get to universi

Question 2

market share

Answer 2

the percentage of a market held
by one company or brand.

Question 3

objectives

Answer 3

a clear, measurable goal, so
success or failure is clear to see.

Question 4

SMART objectives

Answer 4

targets that are specifi c,
measurable, achievable, realistic and time-boun

Question 5

survival

Answer 5

keeping the business going, which
ultimately depends on determination and cash.

Question 6

fixed costs

Answer 6

costs that don’t vary just because
output varies, for example rent

Question 7

interest

Answer 7

the charges made by banks for the
cash they have lent to a business, for example six
per cent per year.

Question 8

profit

Answer 8

the difference between revenue and total
costs; if the fi gure is negative the business is
making a loss.

Question 9

revenue

Answer 9

the total value of the sales made within
a set period of time, such as a month.

Question 10

total costs

Answer 10

all the costs for a set period of time,
such as a month.

Question 11

variable costs

Answer 11

costs that vary as output varies,
such as raw materials.

Question 12

Break even

Answer 12

the level of sales at which total costs are equal to total revenue. At this point the business is making neither a profit nor a loss

Question 13

Cash flow forecast

Answer 13

estimating the likely fl ows
of cash over the coming months and, therefore,
the overall state of one’s bank balance.

Question 14

closing balance

Answer 14

the amount of cash left in the
bank at the end of the month.

Question 15

opening balance

Answer 15

he amount of cash in the
bank at the start of the month.

Question 16

negative cash flow

Answer 16

when cash outfl ows are
greater than cash infl ows.

Question 17

net cash flow

Answer 17

cash in minus cash out over the
course of a month.

Question 18

crowdfunding

Answer 18

raising capital online from
many small investors (but not through the stock
market).

Question 19

dividends

Answer 19

payments made to shareholders
from the company’s yearly profi ts. The
directors of the company decide how large a
dividend payment to make; in a bad year they
can decide on zero.

Question 20

retained profit

Answer 20

profi t kept within the business
(not paid out in dividends); this is the best
source of fi nance for expansion.

Question 21

share capital

Answer 21

raising fi nance by selling partownership in the business. Shareholders
have the right to question the directors and to
receive part of the yearly profi ts.

Question 22

trade credit

Answer 22

when a supplier provides
goods but is willing to wait to be paid – for
perhaps up to three months. This helps with
cash fl ow.

Question 23

venture capital

Answer 23

a combination of share capital
and loan capital, provided by an investor willing
to take a chance on the success of a small to
medium-sized business.

Question 24

bankrupt

Answer 24

when an individual is unable to pay
their debts, even after all personal assets have
been sold for cash.

Question 25

limited liability

Answer 25

restricting the losses suffered
by owners/shareholders to the sum they invested
in the business.

Question 26

private limited company

Answer 26

a small family business
in which shareholders enjoy limited liability.

Question 27

soletrader

Answer 27

a business run by one person; that
person has unlimited liability for any business
debts.

Question 28

unlimited liability

Answer 28

treating the business and
the individual owner as inseparable, therefore
making the individual responsible for all the
debts of a failed business.

Question 29

franchising

Answer 29

paying a franchise owner for the
right to use an established business name,
branding and business methods.

Question 30

royalities

Answer 30

percentage of the sales revenue to be
paid to the overall franchise owner.

Question 31

Business plan

Answer 31

a detailed document setting out
the marketing and fi nancial thinking behind a
proposed new business.