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Business > Topic 1.3 Putting a business idea into practise > Flashcards

Topic 1.3 Putting a business idea into practise Flashcards

1
Q

What are examples of financial aims?

A

survival, maximise profit, increase market share, maximise sales, achieve financial security

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2
Q

What is survival within a business?

A

the business needs to earn enough money to stay open

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3
Q

What is maximising profit within a business?

A

most business aims for this

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4
Q

What is increased market share within a business?

A

tells you what percentage of a markets total sales a particular product or company has made

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5
Q

What is maximising sales with a business?

A

increasing sales is a good way to grow it’s market share

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6
Q

What is achieve financial security within a business?

A

achieve a point where a business can depend on it’s own revenue

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7
Q

What are some non-financial aims for a business?

A
  • accomplishing a personal challenge
  • achieving personal satisfaction
  • getting independence and control
  • doing what’s right for society
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8
Q

What must a firm do after establishing it’s aims?

A

set business objectives

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9
Q

What can objectives be related to?

A

survival, profit, market share, sales, financial security, personal reasons or social issues

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10
Q

Once objectives have been set they act as?

A

clear targets

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11
Q

What can objectives be used as later?

A

used to measure if they are successful or not

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12
Q

What are the different factors that effect the aims and objectives of a business?

A
  • size and age of a business
  • who owns the business
  • the level of competition
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13
Q

Where do businesses get most of their income?

A

from selling their product to customers

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14
Q

How can revenue be calculated?

A

quantity x units sold

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15
Q

What is a fixed cost?

A

costs that don’t vary with output, have to be paid even if the firm makes nothing

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16
Q

What is a variable cost?

A

costs that will increase as the firm expands its output

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17
Q

How do you workout total variable cost?

A
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18
Q

How is interest written?

A

a percentage

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19
Q

How do you workout interest( on loans )?

A

total repayment - borrowed money/ borrowed amount x 100

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20
Q

Where is interest also applied?

A

to savings, so a business can also earn money

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21
Q

How do you workout profit?

A

revenue - costs

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22
Q

What does it mean if the costs are higher than revenue?

A

the business will make a loss instead of a profit

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23
Q

What is break-even level of output or break-even point?

A

the level of sales a firm needs in order to cover its costs

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24
Q

How do you workout break-even point in units?

A

fixed cost/ sales price - variable costs

25
Q

How do you workout break-even point for revenue (or costs)?

A

break-even point in units x sales price

26
Q

What should all businesses analyse?

A

break-even analysis to find the break even level of output

27
Q

Why is a low break-even output good?

A

it won’t have to sell as much to make profit

28
Q

What does a break even diagram have?

A

number of sales or output on the x-axis, and costs and revenue on the y-axis

29
Q

Why does a business need cash?

A

to pay its employees, suppliers and overheads

30
Q

What is cash flow?

A

the flow of money into and out of the businessW

31
Q

What is cash outflow?

A

when it buys material or pays wages, money flows out

32
Q

What is cash inflow?

A

when a firm sells its product money flows in

33
Q

How do you workout net cashflow?

A

cash-inflows - cash outflows

34
Q

What does it mean if a business has positive cash flow?

A

more cash inflow that outflow for a particular time period

35
Q

What does positive cashflow also mean for a business?

A

it has no problem in making payments

36
Q

What is a negative of a business making payments?

A

losing opportunities to invest in ways that might improve the firm

37
Q

What is positive cash inflow not the same as?

A

profit

38
Q

What can you still have even if a business earns more than it spends?

A

poor cash flow

39
Q

What is a cash flowforecast?

A

a list of the inflows and outflows of cash that appear in the budget

40
Q

What can a cash flow forecast be used for?

A

when the firm may lack cash

41
Q

What can a lack of cash mean to a business?

A

a firm may fail, because it is unable to pay it’s debt unless it sells all it’s assets

42
Q

What can a firm also use a cash flow forecast for?

A

when the business will need a short term source of finance

43
Q

What does credit terms tell you?

A

how long after agreeing to buy a product the customer has to pay

44
Q

What can credit terms effect?

A

the timings of a business cash flows

45
Q

What do new firms need to set up?

A

start-up capital

46
Q

What is a start-up capital?

A

the money or assets needed to set up a business

47
Q

What do new firms often have?

A

initial poor cash flow

48
Q

What does poor initial cashflow mean for a firm?

A

they find it hard to cover their costs, so they need additional finance

49
Q

What must a business do if it is struggling financially?

A

additional finance to meet it’s day to day running costs

50
Q

What are the 2 short-term sources of money?

A
  • trade credit
  • overdrafts
51
Q

What does trade credit mean?

A

businesses may give firms 1 or 2 months to pay for certain purchases

52
Q

What does overdraft mean?

A

lets the firm take more money out of its bank account than it has paid into it

53
Q

What are the 6 long-term sources of money?

A
  • loans
  • personal savings
  • share capital
  • venture capital
  • retained profit
  • crowd funding
54
Q

What is a loan?

A

quick and easy to take out, they are repaid with interest, if its not payed the bank can repossess the firms assets

55
Q

What is a personal savings?

A

a business owner may put some of their own money into the business to get started

56
Q

What is a share captial?

A

individuals can buy shares, meaning they will have part ownership of the business

57
Q

What is a venture capitial?

A

money raised through selling shares to individuals or businesses who specialise in giving finance to new or expanding small firms

58
Q

Whart is retained profit?

A

profits the owner has decide to plough back into the business after they’ve paid themselves a dividend

59
Q

What is a crowd funding?

A

when a large number of people contribute money towards the business or funding idea

Business (10 decks)

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