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The interest rate is the price charged by a bank per year for lending money or for providing credit.

For firms, the level of interest rates is very important because:

It affects consumer demand, especially for goods bought on credit ­ if interest rates increase households decide to…

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Created when the demand for labour has fallen relative to the available supply of labour.
Theory X managers might use the fear created from unemployment to force through cost saving changes in working practices.
Employees choose to stay where they are creating low rates of labour turnover and…

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Businesses with limited liability
Owners are not liable for the debts of the business; they can lose no more that the sum they invested.

Private limited company
The shares of a private limited company can not be bought and sold without the agreement of the other directors.
Therefore the company…

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Volume of goods sold X Average selling price

Fixed Costs: any costs that do not vary directly with output ­ they exist even if a business is not producing any goods or services. E.g. electricity.

Variable Costs: costs that vary directly with the level of output e.g.…

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A cash flow forecast will enable a business to do the following things:

Anticipate the timing and amounts of any cash shortages
Arrange financial cover for any anticipated shortages of cash.
Review the timings and amounts of receipts and payments.
Obtain loans (if the problems are long term) or overdrafts…

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Sales will be low. There will be high costs per unit because sales are low but launch costs are high and overheads are being spread over a few
units. Pricing depends on different strategies e.g. skimming or penetration.

Sales are increasing. There will be falling costs per unit as…

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PROBLEM CHILD: a low share of a fast-growing market. These products usually need a high level of investment to promote and get
them distributed.
DOGS: a low share of a declining market. The product or brand will be killed off once it's sale drop below break even.

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Niche Marketing
Niche market businesses sell specialised, differentiated products that are designed to appeal to their very specigic target audience.

Firms selling niche products can exploit the low price sensitivity created by product differentiation by raising prices.

Small niche operators lack the economies of scale required to compete on price…

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They could be put on a graph, the x axis being interest and y axis influence. Although this is subjective.


Identifies strengths and weaknesses of the business idea.
Highlights financial risks involved.
Helps to obtain finance.

The contents of a good plan:

1. Executive Summary
2. The…

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It can be slackened or tightened according to the economic circumstances. E.g. in a recession rates are decreased to try and encourage increased spending.

Supply-side Policy

Any policy which helps to increase supply ­ mainly aimed at helping markets to work better (increased productivity)

Exchange rate Policy

This influences the…


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