GCSE Business Studies - 3.3 Revision

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What is cash flow?
The flow of cash into and out of the business.
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What is financial management?
Deliberately changing monetary variables, like cash flows, in order to improve financial performance.
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What are the six methods of improving cash flow?
Increasing sales revenue, de-stocking, establishing more favourable credit terms with suppliers, spending less on raw materials, delaying paying invoices and leasing rather than buy equipment.
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How will increasing sales revenue improve cash flow?
It will increase inflows.
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What is de-stocking?
Reducing the levels of stock in the business.
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How will de-stocking improve cash flow?
It will speed up inflows
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How will establishing more favourable credit terms with suppliers improve cash flow?
Longer trade credit will delay outflows.
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How will spending less on raw materials improve cash flow?
It will reduce outflows.
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How will delaying paying invoices improve cash flow?
This will delay outflows.
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How will leasing equipment rather than buying equipment improve cash flow?
This will reduce outflows.
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When does profit occur?
When the revenues of a business are greater than its costs over a period of time.
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What are the five methods of increasing profit?
Cutting costs, reducing raw material costs, reducing labour costs, cutting back on investment projects and spending less on advertising.
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What are the three methods of increasing revenue?
Improving marketing, selling better products and changing the price.
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How will these methods increase revenue?
They will increase the quantity sold.
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What is the break-even point?
The level of output where the total revenue is equal to the total costs. Neither a profit or a loss is being made.
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How do we calculate break-even?
Fixed costs / selling price per unit - variable costs per unit.
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What is a break-even chart?
A graph which shows total revenue and total costs, allowing the break-even point to be drawn.
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What is the margin of safety?
The difference between the actual level of output where profit is being made and the break-even level of output. It is the number of units output could drop beore the business needs to worry about making a loss.
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What happens if the margin of safety is zero?
Output is at or below the break-even level.
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What is the total revenue?
The revenue earned by a business from the sale of a given quantity of products.
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How do we calculate revenue?
Price x quanity sold.
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What are the total costs?
All the expenses of a business.
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How do we calculate total costs?
Fixed costs + variable costs.
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What are fixed costs?
Costs which do not vary with the level of output.
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What are some examples of fixed costs?
Rent, advertising, salaries etc.
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What are variable costs?
Costs which vary directly with the level of output.
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What are some examples of variable costs?
Raw materials, packaging etc.
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Where are internal sources of finance obtained?
From within the business.
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What are two examples of internal sources of finance?
Retained profit and sale of assets.
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What is retained profit?
Profit which has been earned in an earlier period which is then kept back for reinvestment in the business.
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What is sale of assets?
Selling items owned by the business to raise funds.
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Where are external sources of finance obtained?
From outside the business.
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What are two examples of external sources of finance?
Share capital and loans.
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What is share capital?
Finance is raised by selling shares, in exchange for part ownership in the business and a share of the future profits. Businesses can sell their shares to the public on the stock market or firms could sell shares to professional investors.
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What is a loan?
A sum of money borrowed from the bank, which has to be repaid, with interest over a period of time.
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Other cards in this set

Card 2

Front

What is financial management?

Back

Deliberately changing monetary variables, like cash flows, in order to improve financial performance.

Card 3

Front

What are the six methods of improving cash flow?

Back

Preview of the front of card 3

Card 4

Front

How will increasing sales revenue improve cash flow?

Back

Preview of the front of card 4

Card 5

Front

What is de-stocking?

Back

Preview of the front of card 5
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