AS Business Revision Notes Unit 1

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Unit 1 Business- Revision
o Enterprise- The ability to handle uncertainty and deal efficiently with change.
o Entrepreneur- someone who has a flair for business ideas and has the confidence to take the risks involved
in setting up a business.
o Successful entrepreneurs:
Motivate people around them
Determined to succeed
o Common characteristics of successful entrepreneurs:
Self-confidence- believe in your ideas; products and be able to motivate others.
Initiative- being prepared to start something.
Hard working- not easy to set up a business.
Creativity- inventing new products, finding new ways to do things.
Resilience- be prepared to redesigned and rethink, don't let setbacks put you off.
Taking risks.
o Small Businesses:
Less then 50 employees
Value of sales less then £2.8 million
Value of balance sheet is less then £1.4million
Why do people set up businesses?
Be your own boss
Work from home
Help others
Gap in market
Peruse a hobby
Make money
No job security
Loose money
Others could copy idea
May not have regular income
Demand for product falls
Personal pride/satisfaction
Satisfied customers
Provide employment

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Benefit family
Government Support
Financial- grants, subsidies, tax cuts and loans.
Provide info and support- websites e.g. business link
Create enterprise zones
Reduce regulation- red tape
o Revenue expenditure is every day expenditure ­ gas, electricity, paying suppliers for materials, petrol,
wavers and salaries.
o Capital expenditure is expenditure on assets- car, machinery and equipment.
Sources of Finance
o Retained profit:
Whatever profits the business makes is ploughed back into the business to make it grow.…read more

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If the business fails you've lost your own money
o Bank Overdraft
Balance of a bank account when funds withdrawn exceed funds deposited
Arranging a flexible loan on which the business can draw as necessary up to an agreed limit
Flexible- there when you need it, helps to maintain cash flow and you only borrow what you
need.…read more

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Not giving control up
Money you've used for leasing could go else where
The item never belongs to you
o Bank Loans
Sum of money lent for a fixed period of time with interest
Length of loan can vary
Interest is fixed
Loan guarantees business has money
Bank has no control of business
Interest rates
Loose possessions due to debt
Pay it, even if you're not earning profit
o Venture Capital
Capital invested in a project in which there is a substantial…read more

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Higher risks of being took
o Factors that determine which source of finance to use:
Length of time- short term or long term
Control- how much are you willing to give up?
Amount needed
What is the money needed for?
Affordability- can you afford to repay?
Level of risk you are willing to take
Type of business
o Expenditures made by a business in order to carry out trading.
Types of costs:
FIXED- those that do not change with levels of output or sales.…read more

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Profit- what is left after total costs have been deducted from revenue.
o Contribution
not the same as profit- fixed costs are not subtracted
Goes towards paying your fixed costs, and the left over is profit.
o Total Contribution:
you can increase this by:
increasing selling price
reduce variable costs per unit
o Break-even
The number of products you need to sell or make to cover costs, and not lose anything or make profit.…read more

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Margin of safety
Difference between current sales and break-even point
It shows the amount by which demand can fall before the business starts making a loss
What can affect the breakeven point?
Action Effect
Increase fixed costs Break-even rises, need to make/sell more to
Prices increase Increase in revenue, break-even point falls
Increase in variable costs Break-even point rises
Fall in demand Break-even point is not effected but margin of safety
is reduced
Price cut Break-even increases
Strengths of Break Even
Simple to understand…read more

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Indicate periods of time where there might be cash flow problems e.g. negative cash
Put plans in place to cover periods of negative cash flow e.g. arrange an overdraft or
short term loan
If there is significant negative cash flow to identify outflows may be reduced
Review timings and amounts of recipes and payments (e.g. may need to reduce credit
terms to customers or extend credit terms with suppliers)
Show to a potential lender or investor e.g. bank of venture capitalist or business angel.…read more

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Benefits of Budgeting
Help motivate staff e.g.…read more

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Where actual sales lower than budgeted
Where actual costs lower than budgeted
Adverse variance occurs ---
Where actual profit lower than budgeted
Where actual sales lower than budgeted
Where actual costs higher than budgeted
o Protecting Businesses Rights
Intellectual property
Is property that results from original creative thought, as patents, copyright material
and trademarks.…read more


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