Business studies - theme 2 - definitions

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  • Created by: s2000
  • Created on: 28-05-18 14:40
Sources of finance
Places from which businesses may gain finance.
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Internal sources of finance
Owner's capital:personal savings, Retained profit, Sale of assets
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External sources of finance
Family and friends, Banks, Peer-to-peer funding, Business angels, Crowdfunding, Other businesses
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Collateral
Something of value that is used as security when a loan is offered. In the event of a business being unable to pay the loan back, the asset is transferred to the bank and sold in order to generate the money due for repayment.
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Business angels
Individuals who invest in the very early stages of a business, taking a significant equity (share) stake.
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Crowdfunding
Obtaining external finance from many small investments, usually through a web-based appeal for investors.
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A method of finance
The process through which a source of finance provides money to a business.
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Methods of finance
Loans, Share capital, Venture capital, Overdrafts, Leasing, Trade credit, Grants
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Venture capital
A method of providing finance in higher-risk investments generally through a combination of loans and shares
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An overdraft
A facility offered by a bank to allow a customer to continue spending money even when their account becomes negative. There will be a limit to the overdraft.
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Leasing
An alternative to buying an asset outright. Instead the asset is rented for a monthly fee for a set period of time.
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Trade credit
When goods or services provided by a supplier are not paid for immediately.
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Liquidation
Occurs when a company's owners close down the company, selling off its assets to generate cash to pay off the debts of the business.
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A business plan
A document setting out a business idea and how it will be financed, marketed and put into practice.
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A trend
The general path that a variable takes over a period of time.
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Fixed costs
The costs that do not change as output changes.
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Variable costs
Costs that change in direct proportion to the level of output.
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Break-even
A position where a business is selling just enough to cover its costs without making a profit.
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Overhead costs
Costs incurred by the business as a whole but can be difficult to attribute to a particular section of the business.
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A budget
A target for revenue or costs for a future time period.
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Variance analysis
Looking back to calculate the difference between a budgeted figure and the actual figure that occurred.
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Profit
The difference between the revenue of a business and the costs generated by the business during a period of time.
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Cost of sales
The collective name given to the costs directly associated with making a product, such as materials, and costs of running the factory.
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Fixed overheads
The costs that have to be paid no matter how well the business is performing, such as management salaries and rent on the head office.
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Net financing cost
The income from interest on bank deposits minus the interest charges from overdrafts and loans. It will usually be a negative number.
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A statement of comprehensive income
A document produced by public limited companies that shows revenue, a break-down of different types of cost and different types of profit for a year.
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Profitability
States profit as a percentage of sales revenue.
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Liquidity
The ability of a business to find the cash it needs to pay its bills. The cash must be readily available either in the bank account or in the form of a payment from a customer that is due very soon.
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Current assets
Items the business owns that are in the form of cash or can be easily turned into cash quickly without a major loss in their value. The three current assets are cash, money owed by customers (receivables/debtors) and stock.
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Current liabilities
Debts owed by the business that are due to be paid within the next 12 months. The two main current liabilities are trade creditors and overdrafts.
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Fixed assets
Items owned by the business which it intends to use over and over to generate profit (e.g. property and machinery.)
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Working capital
The money that is available for the day-to-day running of the business.
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Internal causes of business failure
Marketing failure, Financial failure, Systems or operations failure
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External causes of business failure
Change in technology, New competitor, Economic change, Behaviour of banks
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Job production
Involves making one-off items to suit each customer's individual requirements.
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Batch production
Makes a group of products to one specification at a time, allowing some variation in products, yet some specialisation.
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Cell production
Involves organising workers into small groups or cells that can produce a range of different products more quickly than job production allows.
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Flow production
Continuous production of a single, standardised product.
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Automation
Using machines to complete tasks within a process.
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Productivity
A measure of the efficiency of the production process. It is usually measured as output per worker per time period.
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Efficiency
Measures the extent to which the resources used in a process generate output without wastage.
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Labour intensive production
Means a production process lies heavily on human input with little use of automation.
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Capital intensive production
Uses high levels of automation, reducing the role of humans as much as possible, replacing them with machines.
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Capacity
The term used to describe the maximum possible output of a business.
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Capacity utilisation
The proportion of maximum capacity being used by the business.
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Stock / Inventory
The name given to the materials, partially made products and finished goods owned by a business, which have not been sold.
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Buffer stock
The minimum amount of stock that a business aims to always have available.
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Just-in-time stock management
A Japanese rooted approach to stock manage that aims o eliminate buffer stock completely.
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Waste minimisation
The aspect of lean production that focuses on reducing waste in any business process, such as wasted time, labour or materials.
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Lean production
A collective term for a range of Japanese techniques designed to eliminate waste from business processes.
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4 ways to manage quality
Quality control (QC), Quality assurance (QA), Total quality management (TQM), Quality circles
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Quality circle
A group of staff who meet regularly to find quality improvements.
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Inflation
The percentage rate at which average prices rise during a year within the whole UK economy.
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Exchange rate
The value of one currency expressed in terms of another.
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Rate of interest
The amount charged by a lender per year for borrowing money. This is expressed as a percentage of the amount of money outstanding.
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A cartel
A group of companies operating in the same market who make agreements to control supply and thus prices.
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The competitive environment
Refers to not just how many competitors a business faces, but to how directly other firms' products are in competition and how fierce rivalries are.
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A monopoly
A single business that dominates supply in a given market.
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An oligopoly
A market dominated by just a few major suppliers.
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Collusion
Occurs when two or more rival businesses agree to fix supply or prices within their market. This is illegal.
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Other cards in this set

Card 2

Front

Owner's capital:personal savings, Retained profit, Sale of assets

Back

Internal sources of finance

Card 3

Front

Family and friends, Banks, Peer-to-peer funding, Business angels, Crowdfunding, Other businesses

Back

Preview of the back of card 3

Card 4

Front

Something of value that is used as security when a loan is offered. In the event of a business being unable to pay the loan back, the asset is transferred to the bank and sold in order to generate the money due for repayment.

Back

Preview of the back of card 4

Card 5

Front

Individuals who invest in the very early stages of a business, taking a significant equity (share) stake.

Back

Preview of the back of card 5
View more cards

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