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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…

Page 2

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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…

Page 3

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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Balance of a bank account when funds withdrawn exceed funds deposited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…

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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

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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…

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o 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…

Page 7

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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,…

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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…

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o Benefits of Budgeting
Help motivate staff e.g. given sales targets
Gives people financial responsibility
Helps to control costs
Gives employees financial responsibility
For a new business helps it to assess whether it is viable or not
Can persuade lenders of the viability of the business
Provides clear goals ­…

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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,…


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