Business THEME 2 Flashcards
Owner’s capital
How much the owner has invested into the business or the assets of the business the owner owns
Creditors
People who the business owes money to
Retained profit
Profit that gets stored then reinvested into the company
Sources of finance - where the finance is coming from
Family and friends, crowd-funding
Methods of finance - how the finance is provided
Loans, venture capital, grants
Unincoporated
Not a seperate legal identity between owner and business = Unlimited liability
Incorporated
Seperate legal identity between owner and business = Limited liability
Insolvency
The inability to pay debts because of heavy loss
Liquiditation
Turning assets into cash
Business plan
A plan documenting how a business will reach their objectives
- Company and product description
- Target audience
- Competetive analysis
- Funding requirements
Cash flow forecast
A statement of expected cash inflow from sales, and expected cash outflow to cover costs
Overdraft
When a bank allows you to withdraw more money than the money that actually exists in your current bank account
Main causes of cash flow problems
Low profits, overtrading
Overtrading
When a business expands too quickly without the resources to support that growth
Debt factoring
When a business trades their awaited invoices for cash with a third-party (debt-factoring companies) instead of waiting for customers to pay the invoices. (quick way of making cash flow) however a small fee is paid to the third party.
