Buisness Basics Flashcards

Question

Share prices & market capitalization

Answer 1

Market capitalization represents the total market value of the issued share capital of the company

Answer 2

Share price (per share) x number of shares issued

Answer 3

Equity finance Returns in dividends and capital growth Part of the ownership of a company Long-term source of finance Returns tend to be higher but higher risk Can be repaid

Answer 4

• Most commonly in the form of loans or overdrafts • Return: interest on amount loaned and outstanding • Repaid over an agreed period • Can be short or long-term • No participation in the ownership of the company • Often secured against the assets of the company

Answer 5

.Cash is money coming in and going out of a business on a day to day basis .cash is the lifeline of any business and is more important on the short run to pay for e.g stock of groceries and clothing or for wages.

Answer 6

.profit is equal to total revenue minus total costs, where p= tr-tc .lower profits have an impact on share price .a business can trade for many years without profit .to improve profitability a business must either increase revenue or reduce their costs.

Answer 7

Profit:total revenue - total cost in a business, or what is left once all the bills have been paid Cash: this is money available in the business to pay the bills, cash ,any not come in the same month as it goes out.

Answer 8

Usually b to b trades Is an agreement between the buyer and seller that the buyer doesn’t have to pay for an agreed amount of time Decided by the two companies.

Answer 9

To pay suppliers To pay overheads To pay employees To prevent business failure

Answer 10

The movement of cash into and out of a business

Answer 11

Low profits or (worse) losses Too much production capacity Excess inventory Allowing customers too much credit & too long to pay Growing the business too fast (overtrading) Unexpected changes in the business

Answer 12

Spending too much on fixed assets Made worse if short-term finance is used (e.g overdraft) Fixed assets are hard to turn back into cash on the short-term

Answer 13

E.g sell shop and lease it from buyer for set amount of time Gives you the money from sale - money from rent

Answer 14

Companies that specialise in getting money out of customers They buy the debt from the business Then the relationship only lies between the debt factoring company and the customer.

Answer 15

-Advanced warning of cash shortages -make sure the business can afford to pay suppliers and employees -spot problems with customer payments -as an important part of financial control -provide reassurance to investors and lenders that the business in being managed properly

Answer 16

Marketing Finance Operations HRM (Human Resource management)

Answer 17

Indicates the potential sales for a firm (the “size of the prize”) Usually measured in terms of both volume and value Size of individual segments within the overall market can also be measured Nor normally a marketing objective- since a firm cannot influence it.

Answer 18

Size if the market- is it a big enough market? Is it feasible for the firm to Growth in the market -does the market have enough future potential Market structure- what level of competition is there? How intense will the competition be? Segmentation of the market- who will the company be targeting ?what are their needs and wants Social trends- changing lifestyles etc

Answer 19

-indenting future trends -is the product viable -identify opportunities and threats

Answer 20

A statistical technique which looks at the strength of the relationship between two variable and how they are related. For example, the relationship between advertising expenditure and sales increases.

Answer 21

The variable that causes a change in the other

Answer 22

The variable that is impacted by the independent

Answer 23

No estimated data can be 100% reliable Confidence intervals help businesses to understand how reliable an estimate is A confidence interval gives the percentage probability

Answer 24

One method of forecasting sales is to look at what has been happening in the past and to continue the trend until the future This is called extrapolation

Answer 25

Elastic goods = an answer greater than 1, where demand will change with a price change In elastic goods= less than 1, where demand is relatively unresponsive to a change in price Unitary elasticity= when price and demand fall at the same rate

Answer 26

%change in quantity demanded / %change in consumer income If the answer is positive - an increase in income increases demand. A decrease in income decreases demand. This happens for most ‘normal products’

Answer 27

If the answer is negative - an increase in income decreases demand. A decrease in income increases demand This happens to ‘inferior’ products If income rises, customers switch to other products

Answer 28

If the YED is 2 this means that the change in quantity demanded is 2 times the change in income. A 1% change in income leads to a 2% change in quantity demanded.

Answer 29

Improved financial performance and reduced operating costs. E.g reduced waste disposal costs Enhanced brand image Will avoid pressure group actions impacting demand (protesters) Growth of ethical investing means more potential capital It will be attractive to some investors and easier to raise finance Improved share prices It is necessary in order to avoid excessive regulation and legislation Socially responsible actions can be profitable (add to profits)

Answer 30

Might not focus on business operations Extra costs will be incurred which will be passed onto consumers Businesses may not be able to be as efficient if there are restrictions on how they produce their products and where they locate May reduce firms internationally competitiveness if others aren’t doing it Aslong as they comply with legislation they should be able to do what they want

Answer 31

Contribution is where the profit from a sale is put towards paying fixed costs. Once contribution covers these fixed costs the business makes profit

Answer 32

Total revenues - total variable costs

Answer 33

Selling price (per unit) - variable cost (per unit)

Answer 34

Fixed costs (£) / contribution per unit (£)

Answer 35

Fixed costs / contribution per unit

Answer 36

A companies ability to efficiently turn revenue to profit

Answer 37

Gross profit Operating profit Net profit

Answer 38

Higher the percentage the better

Answer 39

Gross profit / revenue x 1000

Answer 40

Taking out overhead cost

Answer 41

Operating profit / sales(revenue) x 100

Answer 42

Profit that is kept and reinvested from previous years success May not be available for new business ventures who don’t turn a profit +No interest +wont loose any control -can cause conflict between shareholders and managers in limited companies -can hurt a firms cash flow

Answer 43

Non current assets are items the business owns and will repeatedly for longer than a year in its main operations, such as vehicles and machinery -usually just sitting around

Answer 44

Selling an asset and then renting it back from the person you sold it to Frees up cash Still have the machine

Buisness Basics Flashcards

(70 cards)