Buisness Finances Flashcards
(25 cards)
Dept finance
Borrowing money from lender. Interest needs to be paid even if you are not profitable.
Equity finances
Investors contributing money to a business in return for part ownership. Owners are entitled to future profits the business makes, usually paid in dividends.
Financial documents that businesses use
Income statement( revenue and expenses) Balance sheet (assets, liabilities and owners equity) Cash flow statement (cash inflows and outflows)
Benifits of being an incorporated company
Less risk
More access to finance
Negatives of an incorporated business
Less control
Less decision making
More legal complications and regulations
What is a business with one owner called?
A sole trader
What do sole traders face?
Unlimited lability
What is a partnership
Business shared between 2 to 20 people. They have unlimited liability.
What does unlimited liability mean?
He or she can be forced to sell personal assets to pay for the depts of the business
Two types of company
Private
Public
Companies have
Limited liability
Have gone through the process of incorporation
Private company
Has less than 50 private shareholders
Public companies
Shares are sold and brought on the stock exchange.
Vision
What you see the business being / doing - why this business exists
What is a mission statement
A formal statement that tells people what the business is and what it aims to achieve. Consider and specific. Only a few sentences.
What is in a mission statement
Business porpoise Business characteristics Promise to stake holders Values and beliefs Public image
What is an entrepreneur?
Someone who starts operates and assumes the risk of a business venture in the hope of making a profit
Entrepreneurs need to
Decide and appropriate location
Consider demographic
Woke out who competitors are
Decide on appropriate target market
Competitive advantage
Ability of a business to develops strategies that ensure it has an edge. The edge allows businesses to gain greater market share over competitors.
What percent of small businesses fail
33% in the first year
75% within the first 5
Characteristics of a sole trader
One owner Limited life Limited finance access Unlimited liability Personal
Characteristics of a partnership
Two or more owners Split- doesn't have to be equal Tex laid by each partner Access to finance from partners Unlimited liability Personal
Private company characteristic
1-50 owners separate legal entity Tax paid by company Better access to finance Limited liability Company
Characteristics of a public company
5+ owners Separate legal entity Tax paid by company Best access to finance Unlimited liability
