Unit 1.3

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What are the sources of finance?

  • Bank loan
  • Family and Friends
  • Overdrafts - a business can spend more then they have, then they pay it back with high interest rates.
  • Mortgage
  • Trade Credit - they pay for their stock 1-2 months after its delivered.
  • Grants - is normally given by a government organisation or a charity.
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Why does the govenment support entrepreneurs?

  • business's pay tax
  • boost the economy
  • regenerate areas
  • Try ro move out of recession
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What are the equations for calculating Profit and

Profit

Profit = Sales revenue - Costs

Sales Revenue

Revenue = Price x Quantity Sold

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What is shown in a Cash Flow Forecast?

  • Receipts (cash in) - the money paid in
  • Payments (cash out) - anything the business spends that month
  • Net Cash Flow - the difference between receipts and payments
  • Opening Balance - the money the business has at the start of the month
  • Closing Balance - The money the company has at the end of the month
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How can businesses try and prevent the cash shorta

  • Trade Credit - make payments to your supplier at a later date
  • Get customers to pay earlier
  • Bank Loan - however there will be high interest attached.
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