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Business Btech > Unit 3 E > Flashcards

Unit 3 E Flashcards

1
Q

What is an external source of finance?

A

Money you fund expenditure from outside the business

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2
Q

What is an internal source of finance?

A

Money you fund expenditure from inside the business

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3
Q

Name 3 internal sources of finance.

A
  • Retained profit
  • Sale of assets
  • Net current assets
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4
Q

Name 3 external sources of finance.

A
  • Crowdfunding
  • Mortgages
  • Venture capital
  • Debt factoring
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5
Q

What is crowdfunding?

A

The use of small amounts of capital from a large number of people

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6
Q

What is venture capital?

A

Money invested in a business, usually a startup

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7
Q

What is debt factoring?

A

When a business sells something to another business and then sells that debt to another business to get paid

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8
Q

What are cash sales?

A

Customer pays at the time of purchase

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9
Q

What are credit sales?

A

When the customer pays within a pre-agreed period after the sale

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10
Q

What are loans in terms of cash inflow?

A

Bank loans allow a business to borrow a set amount of money for a specific purpose

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11
Q

What does capital introduced mean?

A

Money invested by the entrepreneur or other shareholder

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12
Q

What is the definition of cash outflow?

A

Money that’s going out of the business

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13
Q

Name 3 examples of cash outflows.

A
  • Supplier costs
  • Wages
  • Rent
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14
Q

What is value added tax (VAT)?

A

A charge on sales of goods and services based on the value of the items sold

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15
Q

What is a cash flow forecast?

A

A document that shows the predicted flow of cash into and out of the business over a given period of time

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16
Q

What does opening balance refer to?

A

The amount of cash available in a business at the start of a time period

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17
Q

What is interest?

A

The amount of money you pay back/receive after borrowing/lending something

18
Q

What is the formula for net cash flow?

A

Net cash flow = total inflow - total outflow

19
Q

What is revenue income?

A

Revenue generated when customers buy the goods/services of the business

20
Q

How is rent received a type of revenue income?

A

Residents generate income by paying rent to the business

21
Q

Define a cash inflow.

A

Money coming into the business

22
Q

Define a cash outflow.

A

Money going out of the business

23
Q

Name 3 examples of cash inflows.

A
  • Bank loan
  • Cash sales
  • Credit sales
24
Q

What is the formula for closing balance?

A

Net profit + opening balance

25
Q

What might be problems with a cash flow forecast?

A
  • Forecasts are assumptions
  • Might be outdated
  • Costs could be missed
  • Seasonality needs to be considered
26
Q

True or False: A cash flow forecast predicts what is going on in the future.

A

True

27
Q

What is one advantage of visiting a bank branch in person?

A

Clear communication with the staff

28
Q

What is one disadvantage of crowdfunding?

A

Partial loss of ownership

29
Q

How does hire purchase differ from leasing?

A

In hire purchase, the asset is owned until the final installment, whereas in leasing, the supplier owns the asset

30
Q

What is one advantage of owner’s capital?

A

No interest payments

31
Q

What is one disadvantage of owner’s capital?

A

Amount likely to be limited

32
Q

What is insolvency?

A

When a business is unable to meet day-to-day expenditure and repay debts

33
Q

Outline one benefit of a cash flow forecast

A

Encourages planning

Benefits of cash flow forecasts include monitoring finances and helping to raise finance.

34
Q

Outline one limitation of a cash flow forecast

A

Based on forecasts

Limitations include human error, difficulty in planning for unexpected events, and time consumption.

35
Q

What is the formula for contribution per unit?

A

Selling price - variable cost per unit

36
Q

How is the break-even point calculated?

A

Fixed costs / contribution per unit

37
Q

What is the formula for contribution per unit

A

Contribution per unit:selling price -variable cost per unit

38
Q

What is the formula to calculate break even

A

Fixed costs/contribution per unit

39
Q

What is the formula for total revenue

A

Quantity sold-Selling price

40
Q

What is the margin of safety and what’s the formula

A

Its The margin for the business to actually make money

Actual sales in units - break even level of sales units

Business Btech (6 decks)

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