Business Revision 2

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  • Created by: deieso
  • Created on: 14-05-15 18:27
Bank loan
a specific amount of amount of money borrowed over a fixed time period. Payments will be payed every month.
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Bank overdraft
money allowed to be withdrawn, despite the businesses bank account having a negative balance, being a short term agreement with a high interest rate charged
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Hire purchase
a method of buying equipment in instalments, paying the full cost with intrest, but also keeping the piece of equipemnt once payed off
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a business will biy an asset and then lease it to a business for a fixed period of time and the equipment borrowed belongs to the original owner
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a borrowed amount of money from a PLC which issue you the money with a return of interest
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a way of receiving money from debtors immediately and the facotring company will offer 80% of the amount owed immediately and the reminder will be paid, once the debt is settled minus a commission charge
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trade credit
arrangments with a supplier to postpone payments for goods or services, usually a period of 30 days but will depend on the firms reputation
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retained profits
money saved out of net profit with no interest to pay and easily available
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Price elasticity of demand (PED)
elasticity measures how responsive demand is to a change in a particular variable (if PED is equal to 1 the good has unit elasticity)
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Elastic demand
the demand is relatively responsive to a particular change (more negative than -1 is being elastic)
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Inelastic demand
the demand is relatively unresponsive to a particular change (0 and -1 is the price inelastic)
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Price elasticity of demand (PED) =
% change in demand / % change in price
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a general increase in the level of prices in the economy and leads to an increase in a firms costs as they have to pay more for their raw materials, components and workers as they demand higher wages/prices
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Interest rates
the price at which a business or an individauls is charged for borrowing money or the interest received by a business or individual for investing money
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business expectations are high, sales are high, stocks are low, output near capacity, profit and investments are high, unemployment is low with labour shorted and prices are rising
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optimism fades, fall in sales, sotcks accumulate, profts are lower, investment cut, unemployment rises, price rises slow down
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expectations rising, sales increase, restocking begins, output increases and spare capacity is brought back into production, profits and investment rise, unemployment starts to fall and prices start to accelerate
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Exchange rates
the rate at which one currency trades for another currency on the foreign exchange rateand te vusiness that improt and export goods and services will be interested in exchange rate fluctuations
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Weak pound
a falling exchange rate will help exporters as it will make their goods cheaper overseas
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Strong pound
a rising exchange rate will help importers as it will lower the price of imported goods
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4 main marketing objectives
increasing product differentiation, growth, continuity, innovation
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SMART objectives
specific, measurable, achievable, realistic and timebound
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made when the revenue gained form selling a certain number of goods or service is greater than the cost of producing them
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Break-even/ break-even point
the level of sales at which the total costs of making the items equals the total revenue received from selling the item, there being no profit or loss at this level of sales
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Calculating the break even point =
fixed costs / contribution or through the use of graphs and tables
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Contribution =
sales of price - variable costs
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3 Reasons why firms use the break-even point
to see when a profit might be achieved or a loss suffered, to help spot problems if break-even is not being achieved, to use as a target or objective
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Margin of safety
acts as a safety net for a business as a firm will always aim to sell more than its BEP in order to make a profit, but if any facotrs occur, the firm has time to respond as they fall into their margin of safety
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Margin of safety formula =
actual sales - break-even point = x amount of units
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Fixed costs
those costs that do not change when the level of output is changed and have to be paid even if there are no customers exp. rent, interest on loans, rates and insurance
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Variable costs
variable costs are costs that do not vary with the level of output and the number of customers exp. raw materials, packaging and parts
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Direct costs
expenses that can be attributed to making a particular product, including costs of factory labour, telephone bills and office rent
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Variable costs
general overheads of running the business, including management salaries, telephone bills and office rent
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Cash flow foreacast
a financial document that predicts what the firms incomes and outgoings will be over a period of time
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Cash flow statement
a financial statement that shows the exact amounts of a firms incomes and outgoings over a period of time
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Card 2


Bank overdraft


money allowed to be withdrawn, despite the businesses bank account having a negative balance, being a short term agreement with a high interest rate charged

Card 3


Hire purchase


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Card 4




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