1.6 Business Planning Flashcards
What is meant by the term “business plan”?
A document setting out what a business does and what it hopes to achieve in the future.
What are reasons for a business to have a business plan?
• to raise finance.
• to set business objectives.
• to organise the business.
What are 3 advantages to a business plan?
• it offers opportunities for planners to think analytically about their business using data that has been gathered.
• it can help persuade stakeholders such as potential investors that the business has been thought through and should succeed.
• business’s progress can be monitored helping managers make good quality decisions at the right times.
What are disadvantages to a business plan?
• involve uncertainty.
• do not remove the risk of starting or expanding a business.
• inaccurate planning if planner is inexperienced.
• new or updated plan may be required as a business’s environment can change rapidly.
What does a business plan include?
• details about the entrepreneur or manager. • type of business and it activity. • target market. • resources required. • staff required for the business. • financial forecasts.
What is meant by the term “fixed costs”?
Those costs that do not change when a business increases its output (or production).
What is meant by the term “revenue”?
The income that a firm receives from selling its goods and services.
What is meant by the term “variable costs”?
Those costs that vary directly with the business’ level of output.
What is the formula for sales revenue?
sales x price.
(price x quantity)
What is the formula for total costs?
fixed costs + variable costs.
What is the formula for profit?
revenue - total costs.
What is the formula for variable costs?
variable costs per unit x number of units.
What is the formula for fixed costs per unit?
fixed costs / total number of units.
What is the formula for average unit costs?
total cost / output.
