Business Studies Module 6

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  • Created on: 27-04-16 21:20
Give 2 sources of internal finance
Owners' personal funds, reinvested profit, selling assets
1 of 45
What is reinvested (retained) profit?
Profit saved from a previous year, spent on the business again
2 of 45
Give 2 sources of external finance
Bank loans, selling shares, hire purchase, leasing, government grants, trade credit, venture capital
3 of 45
What is hire purchase?
When a business buys an asset and pays for it in installments (e.g. monthly) until the asset belongs to the business indefinitely
4 of 45
What is leasing?
Renting
5 of 45
What is trade credit?
Purchasing an asset now but not paying until later
6 of 45
What is a venture capital?
A person that will exchange money in return for shares (part of the ownership) in a business
7 of 45
Give an advantage of internal finance
They do not need to be paid back
8 of 45
Give a disadvantage of internal finance
Limited. E.g. owner might not have money to put in
9 of 45
Give a disadvantage of external sources of finance
They usually have to be paid back, usually with interest on top
10 of 45
Give 4 factors a business must consider when choosing a source of finance
Interest rates, time to pay back, amount of money needed, availability, purpose of money, type of liability that the business itself has
11 of 45
Why might a business with unlimited liability not use large sums of external finance?
The owners would be personally responsible for repaying borrowed money
12 of 45
Give 3 things in a business plan
Business name/address, ownership status, product/service, current and forecast financial information, market research
13 of 45
What is meant by ownership status?
Whether the business is sole trader, partnership etc. As well as who the owners are
14 of 45
Give 2 things included in current and forecast financial information
Cash flow forecast, profit and loss account and balance sheet
15 of 45
What is cash inflow?
Monet that moves into a business (e.g. revenue - turnover is the same as revenue)
16 of 45
What is a cash flow forecast?
A prediction of money moving in and out of a business over a period of time
17 of 45
What is net cash flow?
Total inflows - Total outflows
18 of 45
What is cash outflow?
Any money leaving a business (e.g. any expenses such as electricity bill)
19 of 45
What is the formula for closing bank balance?
Net cash flow + opening bank balance
20 of 45
Give 2 ways a business can improvecash flow
Increase revenue, decrease costs
21 of 45
Give 1 way a business can increase revenue
Use marketing mix (4 Ps) (this might increase costs)
22 of 45
Give 2 ways a business can decrease costs
Cheaper suppliers (=poorer quality)
23 of 45
What is gross profit?
Money the business makes from directly selling its products
24 of 45
What is net profit?
The overall profit for a business after cost of production and other expenses have been taken away
25 of 45
What is the formula for gross profit?
Sales revenue - cost of sales
26 of 45
What is the formula for net profit?
Gross profit - other expenses
27 of 45
What is profit percentage used to measure?
How successful a business is
28 of 45
Gross profit percentage = ....
(Gross profit / Sales revenue)*100
29 of 45
Net profit percentage = ....
(Net profit / Sales revenue)*100
30 of 45
Give 1 thing a balance sheet can tell you about a business
Value of the business
31 of 45
What is a fixed asset?
A long term asset that the business will own for more than a year
32 of 45
What is a current liability?
Any liabilities that are not going to last more than a year - short term
33 of 45
What are assets?
Items that the business owns
34 of 45
Give 2 examples of fixed assets
Land, buildings, machinery, vehicles
35 of 45
Give 2 examples of current assets
Cash, stock, debtors
36 of 45
Who are debtors?
People/businesses who owe the business money
37 of 45
Give 2 examples of a current liability
Short term loans, overdrafts, creditors
38 of 45
What is an overdraft
When the bank allows you to borrow money than you have in your account for a short period of time but must be paid back with interest
39 of 45
What are creditors?
People the business owes money to (usually suppliers)
40 of 45
Give an example of a long term liability
Long term loan
41 of 45
Net current assets = ....
Current assets - current liabilities
42 of 45
Net assets = ...
Net current assets - long term liabilities
43 of 45
What is working capital?
Money for day to day use of a business. It has the same value as net current assets
44 of 45
Give 2 ways we can see how a business is performing
Profit/loss over a period of time, profit/sales/aims targets have been met, performance against other similar businesses
45 of 45

Other cards in this set

Card 2

Front

What is reinvested (retained) profit?

Back

Profit saved from a previous year, spent on the business again

Card 3

Front

Give 2 sources of external finance

Back

Preview of the front of card 3

Card 4

Front

What is hire purchase?

Back

Preview of the front of card 4

Card 5

Front

What is leasing?

Back

Preview of the front of card 5
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