Business Unit 2

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What is needed in order to work on a just in time basis?
small product lines, fixed bill of materials, vendor base must be close, linear and constant demand for products, ramp up production to volume
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What are the implications of poor stock control?
not having enough stock poses a significant risk, firms that have too much stock are running inefficiently, costs of holding too much or too little stock and being unable to satisfy demand
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How does a company make themselves lean?
just in time, total quality management, cell production, kaizen, reduction of excess stock holding, improvement of communication between production and marketing departments
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How can liquidity be improved?
using an overdraft, negotiate short or long term loans, reduce personal drawings from the business, sales and leaseback, encourage cash sales and sell all stocks, only make essential purchases, introduce fresh capital, extend credit selected supplier
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How can profitability be improved?
cheaper resources, promote products, increase output for larger sales, rent not buy, reduce staff trained in certain areas, decrease cost of sales by decreasing the raw materials, cheaper distribution channels
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How can a company compare its profitability?
historical figures, competitors sales/figures, profit and losses accounts, percentage changes, statistics as benchmarks, industry average
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what happens in the working capital cycle?
money in when people purchase goods, out when purchase raw materials, costs of production, stock needed
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Why is it important a business calculates sales revenue and costs?
know how much you need to produce, raw material costs, know the future revenue, know how much staff is needed, know costs to be able to make more or less units, estimate future gains or losses
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what are the benefits of cash flows?
clearly see inflows and outflows, can work out opening balances, finances can be managed more easily, know where money is displaced in different areas of the business, know if they will need more staff, know what orders they need from suppliers
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what are the drawbacks of cash flows?
can be easily effected, easy to make errors such as omissions, doesn't take unexpected aspects into account as it's predicted, competitors statistics are not accounted for, quantative data so doesn't contain information on all aspects of the business
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what does a business plan include?
statistics from competitors and the market, predictions from money, sales growth and staff, product specification, break even, research, USP, financial records such as cash flows
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why does an entrepreneur increase finance?
start up costs, expand the business, firther employment, wages, distribution, production costs, research and development
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What are the benefits of leasing?
more cash is left at the end, useful for short term projects
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what are the drawbacks of leasing?
return the equipment after a period of time, expensive and costly
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what are the benefits of venture capital?
can get lots of money fast, allows the business to expand quickly
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what are the drawbacks of venture capital?
lower retained profit, venture capitalists take a share of the profit
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what are the benefits of loans?
covers start up costs, fixed monthly payment, short application time
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what are the drawbacks of loans?
high risk for new businesses, may not be able to repay
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what are the benefits of business angels?
get angels expertise, flexibility of being a loan or a grant
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what are the drawbacks of business angels?
higher share for angel, take time to create a proposal
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what are the benefits of other businesses?
smaller firms are valuable, grant access to commercial contracts
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what are the drawbacks of other businesses?
have to be a big business in order to give money, small businesses must stick to their targets and not follow biger businesses
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what are the benefits of banks?
have for a long time, can loan large amounts of money
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what are the drawbacks of banks?
have to pay high interest, may not be granted a loan
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What are the benefits of personal savings?
can keep all shares, can use money on what you want
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what are the drawbacks of personal savings?
using own money, have a high risk if losing your own money
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What are the benefits of using share capital?
may become a PLC, long term form of finance
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What are the drawbacks of using share capital?
can create dividends, could be arguments if there are two or more entrepreneurs
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What are the benefits of using an overdraft?
flexible, can be arranged easily
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what are the drawbacks of using an overdrat?
limited in use, interest may have to be paid
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What are the benefits of using retained profit?
widely available, do not need to be reimbursed or risked as it is the spare money
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what are the drawbacks of using reatained profit?
not as effective for small businesses, unknown if will have it
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What are the benefits of crowdfunding?
offers a grant to keep, business offers things in exchange for bids
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what is a drawback of crowdfunding?
must be done in a certain amount of time
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What are the advantages of peer to peer funding ?
more liekly to raise the funds, published online so they are easily accessible
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what are the drawbacks of peer to peer funding?
published online so there is no privacy, harder to manage due to the level of investors
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What are the benefits of family and friends?
costs are generally low, little or no interest rates
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whata are the drawbacks of family and friends?
may caus disputes if can't pay back the money, high for business just starting out
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What are the benefits of trade credit?
no interest, get stocks before it has to be paid
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what are the drawbacks of trade credit?
may not be able to afford it, haven't got it for a long time
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What are the benefits of grants?
don't need to pay it back, available to small businesses
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What are the drawbacks of grants?
grant providermay not agree to proposal, guidelines may make you exempt
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What are the benefits of sale of assets?
easy to sell, quick form of gaining finance
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What are the drawbacks of sale of assets?
not guaranteed to cover expenses, short term form of finance
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what are some examples of internal finance
personal savings, sale of assets, retained profit
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what are some examples of external finance?
loan, venture capital, grant, trade credit, share capital
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why do businesses fail?
too much competition, lack of experience, not enough capital to maintain the expenses of ther business, negative cash flow, over borrowing, too many minorities, unforeseen expenditure, lack of planning or organisation, external shocks
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name internal financial causes of business failure
little working capital, negative cash flow, not enough capital
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name internal non-financial casue fo business failure
lack of planning, lack of experience, innovative
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name external finanacial causes of business failure
recession, over borrowing
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name external non-financial causes of business failure
competitors, external shocks
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what happens when a business burns out?
losss of customer base, may be ethical reasons, comepetitors at higher levels, drop in demand or exports, not meeting needs and wants of customers
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what would be the effects of ignoring working capital ?
don't know how much is invested in the business, don't know if it is too much or too little, can make a loss
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what would be the effects of ignoring economic stability?
may start to make a loss, lead to bankruptcy, may be a recession, may not know average price of products or what customers can afford, not know peak times
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what would be the effects of ignoring marketing?
unsure of how much money is going into advertising, don't know the popularity of the products, could get into the wrong target market, may not make people brand aware
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what would be the effects of ignoring overtrading?
haven't got the capacity or resources to support the expansion or growth of the business
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Card 2

Front

What are the implications of poor stock control?

Back

not having enough stock poses a significant risk, firms that have too much stock are running inefficiently, costs of holding too much or too little stock and being unable to satisfy demand

Card 3

Front

How does a company make themselves lean?

Back

Preview of the front of card 3

Card 4

Front

How can liquidity be improved?

Back

Preview of the front of card 4

Card 5

Front

How can profitability be improved?

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