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Business

Spec 1.3 (Putting a Business Idea Into Practice)

QuestionAnswer
Name the 5 most common financial objectives for an entrepreneur 1. Survival 2. Sales 3. Profit 4. Market share 5. Financial security
Name the 4 most common non-financial objectives for an entrepreneur 1. Social entrepreneurship (addressing social issues) 2. Personal satisfaction 3. Challenge 4. Independence and control
What 5 things make aims and objectives vary depending on the business? 1. Size 2. Industry 3. Culture 4. Ownership structure 5. Geographic location
What is the formula for percentage change? (new value - old value)/old value x 100
What are the 2 types of cost? 1. Fixed cost 2. Variable cost
Name 3 ways a business could reduce fixed costs 1. Relocating to cheaper business premises 2. Reducing salaries for workers 3. Spending less on promotional activities
Name 2 ways a business could reduce variable costs 1. Sourcing cheaper materials 2. Buying raw materials in bulk
What do businesses have to think about when trying to reduce costs? Impacts of reducing costs on customer service, quality and speed of delivery
What are the 2 types of profit? 1. Gross profit 2. Net profit
What is gross profit? The difference between sales revenue and the costs directly related to production
What is the formula used to calculate the break even point? fixed costs/(selling price - variable cost)
What 2 reasons make businesses rely on cash flow? 1. Need to pay suppliers, overheads, employees 2. To prevent business failure
Name 3 typical cash outflows 1. Payments on raw materials 2. Paying staff wages 3. Paying bills such as electricity
Name 3 typical cash inflows 1. Money from revenue 2. Money from a loan 3. Money for the sale of an asset
Name 2 short-term sources of finance 1. Overdraft 2. Trade credit
Name 5 long-term sources of finance 1. Share capital 2. Bank loans 3. Retained profit 4. Crowd funding 5. Venture capital
Name a pro and a con of using overdraft as a source of finance PRO: Offers significant flexibility and aids cash flow CON: Interest on overdrafts tends to be higher than on other loans
Name a pro and a con of using trade credit as a source of finance PRO: Increase stock without paying for it which enables a positive cash flow if the stock is sold CON: Suppliers may prioritise delivery to customers who have the shortest repayment dates
What is trade credit? An agreement is made with the business suppliers to buy raw materials but pay at a later date
Name a pro and a con of using share capital as a source of finance PRO: Shareholders may also bring and share expertise which can be beneficial to the business CON: Shareholders are entitled to some of the company's profit
Name a pro and a con of using bank loans as a source of finance PRO: Repayments are made in equal instalments, helping the business with planning CON: The business' assets are at risk if the business does not make repayments as planned
Name a pro and a con of using crowdfunding as a source of finance PRO: Investors are often attracted by incentives such as a sample or early access to a product CON: Businesses must persuade people to invest in them
Name a pro and a con of using retained profit as a source of finance PRO: Does not involve interest or borrowing CON: Shareholders do not receive extra profit for their investment
Name a pro and a con of using venture capital as a source of finance PRO: Venture capitalists often provide business advice CON: Most venture capitalists demand a stake in the business and a say in how it is run
Created by: JoeMather
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