Business unit 1 Chapter 3+4

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why do new businesses need finance
start up capital. buy assets for the business, pay suppliers, working capital and to fund expansion
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Difficulties of finding finance for small new firms
No huge profits for small firms, no spare cash to fund projects, bank is reluctant to lend them money compared to larger firms because of the increased risks
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6 sources of finance
bank loan, loan from friends and family, mortgage, overdraft, trade credit and grant
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GRANT
Money from government/organisation/charity - only given to small businesses in areas of unemployment - MONEY DOESNT HAV RTO GET PAID BACK BUT MANY BUSINESSES DO NOT QUALIFY FOR THEM
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TRADE CREDIT
giving customer 1 or 2 months to pay the supplier - gives risk if not paid back which can damage relationship, good for smaller business that don't have the finance then
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OVERDRAFT
Allows from to take out more than they have - high interest rate
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BANK LOAN
quick and easy, repaid with interest, assets can be repossessed, the interest can increase costs, large amounts can be borrowed - not all paid at once
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LOAN FROM FRIENDS AND FAMILY
no interest, less to borrow, easier, might want to be involved in business, more flexible
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MORTGAGE
5+ Years, long term loan for purchasing building, low interest, house or businesses asset is purchased, repayments every month
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how do the gov. support businesses with finance
encourage them t create employment, give guidance on business plans and staff training. will pay money back if business fails
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How do private firms/banks support small firms with finance
offer financial support, give new businesses advice on how to manage their finance, sometimes put businesses in contact with suppliers and customers
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How do charities support businesses
offer advice and money to help new businesses bc its good for society, e.g. advice, grants and low interest loans to young entrepreneurs
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What is cash flow
flow of money in and out of the business
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what is net cash flow
the difference between cash inflow and outflow
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what is a cash flow forecast
predicting if the firm will have a liquidity problem (lack of cash) forecast needs to be monitored carefully to see any unexpected cash flows. this shows if an overdraft or loan is needed
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poor cash flow =
lack of working capital and staff not paid on time which means poor motivation and unhappiness and so businesses can't take advantage of prompt payment discounts. because they don't have enough cash. creditors won get paid on time so they could take
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3 REASONS FOR POOR CASH FLOW
Poor sales - lack of demand so less money and so they can't pay creditors. OVERTRADING - taking on too many orders and hire too much staff. POOR BUSINESS DECISIONS - no planning/research - bad decisions
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how to improve cash flow
Insist customers give prompt payments no creditors , reschedule payments to suppliers and sell unsold stock - but this could decrease stock sooo
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4. deciding financial rewards factors
how much to pay/wages? salary? other rewards? commons or bonus pr pension scheme
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Factors of recruiting a worker
ages and experience, better skills and qualifications = higher pay - more experienced = higher pay
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deciding how much to pay workers depends on....
what competitors are paying, how experienced they are, how old they are,
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why should a business motivate their staff
they perform better, stay with them fr longer, save money by retaining staff, better reputation for the business, pleasant to customers and care about their work
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benefits of training
boost motivation, learn new tasks and skills - become skilled and this means they can have more responsibility
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benefits of giving diff more responsibility
giving staff variety and extra responsibilities can keep them motivated
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job enlargement
giving staff more tasks to do - varied job + interesting + workers feel valued
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job enrichment
giving them more responsibility - more training, motivated, work harder
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examples of non monetary/fringe benefits
company car, insurance, phone, mea allowance, free gym membership but this can costs lots for the business
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2 LAWS/ MUST HAVE RULES FOR BUSINESSES
All business must have a contract within first two months of working, max of 48 working hours per work
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4 LAWS
Minimum wage, anti discrimination laws, health and safety, leaving employment
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minimum wage
depends on age - leads to motivated staff as they're paid properly - increased productivity, but can increase costs for firms which means they have to increase prices and then a fall in sales and revenue
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anti discrimination laws
men/women/minorities/disabled/age/religion/sexual orientation/ equal pay for men and women doing the same job
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health and safety
all staff must have health and safety training - health and safety training equipment must provided- toilets, showers, fire escapes
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leaving employment
unfair dismissal, can only fire due to incompetent staff and gross misconduct. firm cannot re advertise a redundant job
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whats a redundant job
workers no longer needed
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what is recruitment
appointing the best person for a job
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Full time staff
staff are expensive to pay, available for the full week,fewer staff needed, lower training costs, easier to manage due to fewer staff, workers feel more secure and valued and motivated full time and earning more. MORE MONEY . No dividend loyalties
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Part time staff
less expensive, well rested and motivated. saes on wages. and 2 part time workers are more flexible than 1 full time worker. can be asked to work at busy times of the week - workers prefer part time (families/school)
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why would you need to recruit?
when more staff is needed, when a business expands and has more customers to serve, when a worker leaves and you need a replacement
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Internal recruitment
position filled more quickly, cheaper, already knows firm well, no training needed, leaves another vacancy to fill, can cause jealousy amongst worker, no new ideas or fresh blood, less people to choose from
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External recruitment
ad will be seen by more people,more expensive to advertise externally, new ideas and skills high standard of applicants and wiser choice, no other vacancy to be filled
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selection process
personal recommendation, CV, then interview
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personal recommendation
by feign or existing worker -good for small businesses as it means theyre guaranteed a skilled worker and saves money on ads
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CV
Written application - shortlist of strength of CVs and strength of recommendation
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Interview
face-to-face, assess workers confidence attitude and perosnliaty as well as social and verbal skills
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Other cards in this set

Card 2

Front

Difficulties of finding finance for small new firms

Back

No huge profits for small firms, no spare cash to fund projects, bank is reluctant to lend them money compared to larger firms because of the increased risks

Card 3

Front

6 sources of finance

Back

Preview of the front of card 3

Card 4

Front

GRANT

Back

Preview of the front of card 4

Card 5

Front

TRADE CREDIT

Back

Preview of the front of card 5
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