Business revision, Liability / Planning(2.1.3 and 2.1.4)

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What is meant by unlimited liability?
The business owner has complete responsibility for the finances of the company. Often, sole traders and partnerships are e.g of limited liability. Owner is usually responsible for the assets and finances.
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What will happen to an unlimited liability business if their debts outweigh their assets?
They will go bankrupt. Unlimited liability means it is the responsibility of the owner to cover every penny of the business.
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What is meant by limited liability?
This is often concerned with larger firms such as private limited companies and public limited companies. The owner has a set financial point that they are responsible for.
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What are shareholders responsible for in relation to limited liability companies?
They are only responsible for the shares they have not yet paid.
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Whats the difference between limited and unlimited liability companies?
When businesses with unlimited liability are forced to close, they go bankrupt. When this happens to limited liability firms they go into liquidation.
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What are the main questions which go into a business plan (9)
What problems does the business idea solve-How does it solve problems-How will it make money-How much will be made in 1 year-What is the market-Who is the competition-How will the business compete-What profit/losses can you expect-Time to build firm
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What are cash flow forecasts?
They show how much cash will be coming in and out of a business over a specific period of time. It is a prediction based on plans that the business has made.
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What should a cashflow forecast always start with?
The 'opening balance'.
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Why are cashflows useful for businesses?
They show when there will be cash available to pay expenses. They also show when cash will be tight, and then therefore when the company needs to be careful. They're good for use in negotiations over finance.
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What are the limitations with cash flow forecasts?
They're based on predictions that were accurate in the past, may not be accurate now. Less accurate over long periods of time. Unforeseen expenses. Forecasts are only predictions. Tech can change-makes prod. cheaper. Competitors can change. Seasonal.
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What is a dividend?
The share of the profits that shareholders receive as a reward for their investment.
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How do you work out the total inflow on cash flow forecasts?
Opening balance + all inflows = total inflow
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How do you work out the total outflow on cash flow forecasts?
*add up all outflows*
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How do you work out the closing balance?
total cash inflow - total cash outflow
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Other cards in this set

Card 2

Front

What will happen to an unlimited liability business if their debts outweigh their assets?

Back

They will go bankrupt. Unlimited liability means it is the responsibility of the owner to cover every penny of the business.

Card 3

Front

What is meant by limited liability?

Back

Preview of the front of card 3

Card 4

Front

What are shareholders responsible for in relation to limited liability companies?

Back

Preview of the front of card 4

Card 5

Front

Whats the difference between limited and unlimited liability companies?

Back

Preview of the front of card 5
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