Business Revision

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  • Created by: AM6200
  • Created on: 09-04-16 18:50

Short Term Finance


Delayed Payments

Trade Credits

Bank Overdraft

Credit Cards

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Long Term Finance

Venture Capitalists

Bank Loans

Share Capital (Ltd or Plc Only)



Retained Profit



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Cash Flow

Cash flow forecasts aim to anticipate problems

A poor cashflow means there is a lack of working capital

You can improve cashflow three ways

1) Sell atained stock

2) Be less generous with customer credit terms

3) Get a better credit term with your supplier

Inflows/Receipts: Money from owners, bank loans or cash from sales

Outflows/Payments: Money leaving the business, wages, bills or advertising

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Revenue, Costs & Profits

Fixed Costs: Costs that do not vary with the output of the business e.g. Salaries

Variable Costs: Costs that change with the number of products or services sold e.g. raw materials

Variable Costs = 1 unit cost X Quantity produced

Total Costs: Fixed costs + Variable costs

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A franchise is the right given by one business to other businesses to sell goods or services by using it's name

A franchisor is the business giving the rights

'OR' - Originates

A franchisee is the business that agrees to the license by the franchisor


Well known reputation

Higher chance of survival


Lack of control & Start up costs

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Motivation Theory

Maslows Hierarchy of needs


Physical Survival - Basic wage

Safety - People to feel safe and secure

Love & Belonging - Encouraging teamwork

Self-esteem - Feel valued by others

Self-actualisation - Set staff target

  • Training & Motivated staff is good for a business
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The Marketing Mix

Price - High quality, good value

Product - Has attributes and features customers want

Place - Where the business is located and where the product/service is distributed

Promotion - Communication between business and the customers

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Interest Rates

If interest rates fall:

Consumers are more likely to spend their money

More likely to borrow money

If interest rates rise:

Consumers are less likely to spend their money

Borrowed money costs more

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Just In Case (JIC)

Process you follow to maintain a minimum stock level

Just In Time (JIT)

A business holds no stock and relies upon deliveries of raw materials and components to arrive exactly when they are needed

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Owners - Make profit if successful

Shareholders - delegate responsiblity (directors)

Employees - Interested in job security and promotion prospects


Customers - High quality

Suppliers - Cash flow issues

Government - Receive taxes

Community - Noise and pollution

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Added Value

Added value is the increased worth that a business creates for a product e.g. USP (Unique selling point), Branding

Added value goes towards paying off a companies costs, this will make the business more profit

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Business Cycle

This cycle repeats

Boom - Increase in economic activity

Downturn - Economic activity slows down

Recession - Economic growth is negative

Recovery - Economic activity starts to rise

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Commodity Markets - Raw materials i.e. Oil, Wheat, Steel

Normal Markets - Everyday products i.e. Clothes, Food

Marketing - Promoting a business/product

Market Research - Finding information from consumers in society

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Employment Legislation

Employees pay is equal

No discrimination at recruitment

Working hours are a limited amount of hours

Employees are protected from unfair dismissal

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Recruiting Staff

1) Draw up recruitment documents

2) Receive applications

3) Short listing

4) Selection

5) Training

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Customer Satisfaction


Repeat purchase, Premium prices

Unique selling point, Loyalty, Business reputation

Repeat Business:

Easy and convinient

Effective customer service

Good communication


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Tax Issues

Small businesses:

Income tax - Tax on income earned by workers

Corporation tax - Paid by Ltd on profits of company

National insurance contributions - Tax on earnings of workers

Value added tax - a tax on the value of sales of a business

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Sole Traders/ Ltd

Sole trader

'Increased risk'

100% control

100% of profits



'Reduced Risk'

Control is shared on proportion of shares

Profits are shared

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Legal responsibility of business so the owner may lose personal belongings


Owners and the business are seperate legal entities

They can only lose what has been invested into the business

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Profit, Loss, Price & Cost

Profits - Revenue of business is greater than the total costs

Loss - Total costs of business is greater than the revenue

'Revenue - Costs = Profit or Loss'

Price & Cost - Charge set or price to pay for products

Impacts of a loss?

Unable to repay loans, bills

Less likely chance of survival

Cash flow issues

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Market Mapping


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Ways to compete

Higher quality product/service

Special features

Stronger brand image

Better aftersales service

Wider range

Better design

Enjoyable experience

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Calculated Risk

A numerical value or probability on a risk


Wider target market

Lower costs

Automated ordering


Customer experience

Website costs


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Financial objectives:


Profit & Income


Financial Security

Non-Financial objectives:

Independence & Control

Helping Others

Personal Satisfaction

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Entrepreneurial Skills

Planning - Plan of action

Initiative - Pro-active & get the job done

Taking risks - Invest time & capital

Determination - Not giving up

Decision-making - Good judgement

Persuasion - Convinence banks

Leadership - Lead others

Luck - Luck e.g. High sales

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Invention & Innovation

Invention - Making new items or finding new ways of making items

Innovation - Bringing a new product to the market, that turns an invention into a product

Patent - Rights of ownership of an invention, design or process

Copyright - Legal ownership of material e.g. books, music & films which prevents copies

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Boston Matrix


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Branding & Differentiation

Strong branding creates customer loyalty

High quality - premium price

Advertise heavily - large consumer awareness

Product Differentiation

Distinctive design





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Blue Skies Thinking - Many ideas to solve a problem e.g. brain storming

Lateral Thinking - Thinking differently to find and get new unexpected ideas e.g. thinking outside the box

Deliberate Thinking - Intentional creation e.g. Mindmaps, lists

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Market Research & Data Types

Primary/Field Research - Information no one else has collectes e.g. questionnaires and surveys

Secondary/Desk Research - Information that is collected and already published e.g. reports, newspapers and government publications

Quantative Data - Data that can be expressed as numbers statistically e.g. stock, revenue

Qualitative Data - Data that can be expressed as opinions, judgements and attitudes e.g. Why do people like Heinz Beans?

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Exchange Rates


Exporters, tourism, businesses - good

Importers - bad


Exporters, tourism, businesses - bad

Importers - good


'Strong pound imports cheaply, exports dearly'

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Product Life Cycle 1


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Product Life Cycle 2

Extension Strategies?


Price reduction

Adding value

Exploring new markets

New packaging

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