Year 9 Key Questions 2 Flashcards
What are financial objectives? Identify 4 examples of a financial objective.
Targets expressed in monetary terms such as:
- Survival
- Profit
- Financial Security
- Market Share
What are non-financial objectives? Identify 5 examples of non-financial objectives.
Targets that are not expressed in monetary terms:
- Personal Satisfaction
- Challenge
- Independence
- Control
- Helping Others, these are also known as social objectives, eg to donate a portion of profits to a charity
Explain the difference between fixed and variable costs.
Fixed costs do not change reagardless of the quantity produced, whereas variable costs change with the number of products produced.
Identify examples of fixed costs.
Fixed costs :
* Rent
* Insurance
* Salaries
* Interest
* One off payments such as advertising, equipment
Identify examples of variable costs.
Variable costs :
* Stock
* Raw materials
* Ingredients
* Wages
Define the term break-even point.
The break-even point is the level of output where total revenues are equal to total costs; this is where neither a profit or loss is being made.
What is the margin of safety?
The difference between the actual or projected level of output and the break even level of output.
What happens to the break even point if your total costs fall?
The BEP will fall, the business will reach the break-even point sooner and thus is likely to make a profit sooner.
What happens to the break even point if your fixed costs increase? How might the business respond?
The BEP will rise, and you may need to try and increase your price to cover the increase in costs or look to reduce your variable costs.
What happens to the break even point if you increase the sale price?
The BEP will fall, and you will break-even sooner, provided the number of sales don’t fall drastically as a result.
Define the term cash flow.
The movement of cash in and out of the business. Cash is used to pay the day-to-day expenses of a business such as stock, utilities, salaries and wages.
Explain the importance of cash flow to a business?
A positive cashflow is needed in order to pay its expenses such as their suppliers, overheads, and employess. If these expenses are not paid the business will not be able to operate or carry out its core activity and may be in danger of business failure.
How can a business improve its cash flow?
- Increase inflows; either by raising prices or trying to sell more
- Reduce outflows; reducing prices paid for stock or cutting down on advertsing or changing suppliers, reducing the number of temporary workers
- Sources of finance, e.g. trade credit (buying now and paying later), loans, investment can be used to increase inflows, but they must be accounted for in the outflows too.
Define the term ‘ marketing mix’.
The marketing mix is the combination of product, price, promotion and place strategies that a business uses to meet customers needs which in turn generates sales for their product or service. The marketing mix is also known as the 4P’s.
Explain each of the elements of the ‘marketing mix’.
Product: The product or service is the physical good or service that a business sells. In order to be successful the product has to meet customers needs through either the function, design or be of a particular quality for example.
Price: The price must reflect the value customers place on the product. There are several pricing strategies that a business may use, for example; premium, competitive, psychological or penetrative for example.
Promotion: Promotion is the communication between the business and the customer to generate awareness for the product or service. This includes; advertising, the use of social media, viral advertising, sponsorship and public relations.
Place: The way in which a product is distributed- how it gets from the producer/supplier to the consumer, this includes online and mobile retailing (E-commerce and M-Commerce).
