1.3 Putting a business idea into practise

Question 1

why does a business set aims and objectives

Answer 1

-business performance can be measured by reaching aims
-can motivate workers
-forms a business plan
-clarifies business direction ad aids decision making

Question 2

what are some financial aims a business may have

Answer 2

-market share
-profit
-financial security
-survival
-sales

Question 3

what are some non-financial aims a business may have

Answer 3

-independence
-control
-personal satisfaction
-challenge
-social objectives

Question 4

what is the main aim for a private business

Answer 4

make a profit

Question 5

what is the main aim for a public business e.g. the BBC

Answer 5

meet customer needs/targets

Question 6

what is revenue

Answer 6

revenue is the amount of money a business gets after selling goods

Question 7

what are costs

Answer 7

costs are expenses paid to run a business

Question 8

what are fixed costs

Answer 8

fixed costs are costs that don’t vary with the level of output

Question 9

what are variable costs

Answer 9

variable costs are costs that vary with the level of output

Question 10

what are total costs

Answer 10

total costs are the sum of all the costs in a business

Question 11

how do you find profit

Answer 11

revenue - costs

Question 12

what is interest

Answer 12

interest is the extra money a business will need to pay back to a bank after receiving a loan

Question 12

what is the formula for interest rate

Answer 12

total repayment - borrowed money/ borrowed money. all times by 100 to get percentage

Question 13

what is break-even

Answer 13

break-even is when the total revenue = the total costs (neither a profit or loss)

Question 14

what is the formula for break-even

Answer 14

fixed costs/selling price - variable cost per unit

Question 15

what are some advantages of identifying your break-even

Answer 15

-provides target to motivate you and workers
-allows business to see minimum number of sales to make a profit

Question 16

what are some disadvantages of identifying your break-even

Answer 16

-based on predicted costs and revenues not actual
-only shows how many sales are needed and doesn’t actually do anything towards achieving it

Question 17

what is margin of safety

Answer 17

margin of safety is the number of sales that could be lost before actually making a loss

Question 18

what is the formula for margin of safety

Answer 18

actual sales - breakeven sales

Question 19

what is an advantage of finding your margin of safety

Answer 19

-know how many sales can fall before you make a loss

Question 20

what are some limitations on finding your margin of safety

Answer 20

-all figures are predictions
-doesn’t consider external factors

Question 21

why is cash needed in a business

Answer 21

-to pay suppliers
-to pay overheads
-to pay employees
-to prevent business failure

Question 22

define cash inflow

Answer 22

cash inflow is cash that comes into a business

Question 23

define cash outflow

Answer 23

cash outflow is cash that leaves a business

Question 24

what is a cash flow forecast

Answer 24

a cash flow forecast is an estimation of cash outflows and inflows

Question 25

why do businesses need finance

Answer 25

businesses need finance to: -pay start up costs -pay running costs -expansion -unforeseen events e.g. broken machinery

Question 26

what is an overdraft

Answer 26

an overdraft is overspending on an account to be paid back later with interest

Question 27

what is venture capital

Answer 27

venture capital is an investment from an established business in return for a percentage of the business

Question 28

what is share capital

Answer 28

share capital is finance raised from the sales of shares from the business