1.3 - Putting A Business Idea Into Practice Flashcards Preview

GCSE Business Studies P1 > 1.3 - Putting A Business Idea Into Practice > Flashcards

Flashcards in 1.3 - Putting A Business Idea Into Practice Deck (26)
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What are non-financial objectives of a business?

> Social objectives - charity work
> Personal satisfaction
> Challenge
> Independence
> Control


List Short-term sources of finance.

> Overdraft
> Trade credit


When does a firm have positive cash flow?

When there is cash inflow than outflow for a particular time period.


What are Personal savings?

Owner can put some of their savings into the business. But this is risky as the owner could lose money if the business fails.


What are dividends?

Payments that the shareholders get if the company makes a profit. The more shares a shareholder owns, the higher their dividend will be.


What is Trade credit?

Businesses may give one or two months to pay for certain purchases. Useful for small firms as it gives them time to earn money before paying them. However, the firm could end up with a large if the payment is late. Paying off the debt will increase the firm’s costs so it will need to make sure it can cover its costs


What is share capital?

Individuals could buy shares in a business. They will have part ownership and businesses can gain money through issuing shares.


What is venture capital?

Money raised through selling shares to individuals or businesses who specialise in giving finance to new or expanding firms. Venture capitalists put money is risky businesses but have potential.


Which line is flat on a break-even graph?

Fixed cost doesn’t change


What is crowd funding?

When a large number of people contribute money towards starting up a business or funding a business idea. It’s often used for creative and innovative businesses usually takes place online. Normally each person contributes small amounts of money. Sometimes the people who contribute get rewards.


How do you work out interest?

( (Total payed back - borrowed amount) ÷ borrowed amount ) x 100


Why is cash important?

- to pay suppliers, employees and overheads (ongoing expenses - rent)
- to prevent business failure (insolvency)


What happens when a firm sells below the break-even output?

They are making a loss


What is the break-even point?

The level of sales or output required a firm needs to cover its costs.


What is retained profit?

These are profits that the owners have decided to plough back into the business after they have paid themselves a dividend


Why do different firms have different objectives?

Different organisations have different objectives. Depends on the size and age of the business; who owns the business; the level of competition.


What happens when a firms is selling more than their break-even output?

They are making a profit


What is an overdraft?

Allows firms to take out more money out of its bank account than it has paid into. Allows firm to make payments on time. However, they do have high interest rates and the bank can cancel at any time. If it isn’t paid off the bank can take some of the business’s assets.


How do you find the break-even point on a break-even graph?

Where the total costs line crosses the total revenue line


What is cash?

The money a company can spend immediately


What is an insolvency?

When a firm cannot pay its debts if it has a lack of cash.


What are Loans?

They are quick and easy. Repaid with interest and if it is not paid then the bank can take the firm’s assets. They could pay back the debt in instalments, which will increase the firm’s fixed costs. Before taking out a loan, the firm should make sure the they can still break-even with this increase in costs.


What the financial objectives of businesses?

> Survival - for startup businesses; they need to make enough money to stay open.
> Maximise profit - may take a firm a few years before making profit
> Maximise sales
> Achieve financial security - so a firms can support its own costs with its own revenue
> Increase market share


Which lines start at 0 on a break-even graph?

Variable and total revenue as if no products are sold/made then it won’t cost anything and you won’t get payed for it.


List Long-term sources of finance

> Loans
> Personal savings
> Share capital
> Venture capital
> Retained profit
> Crowd Funding


What is the difference between profit and cash?

Profit is the amount of money a company earns after cost have been taken into account. So a business can make a profit if it earns more than it spends but still run out of cash if it uses its cash to invest in other assets for the business.