business 1 Flashcards
(20 cards)
What are economic variables?
Features of an economy which have effects on business and consumers, e.g., unemployment, inflation, and exchange rates
Economic variables influence business decisions and consumer behavior.
What is internal finance?
The raising of capital/cash from within/inside the business
Examples include personal savings and retained profit.
What is personal savings/owners capital?
A source of internal finance provided by the owner of a business or personal money from the owner
This is a common method for small businesses to fund operations.
What is retained profit?
Profit that is re-invested back into/kept by the business which is not paid as a dividend
Retained profit is an internal source of finance.
What is the sale of assets?
A type of internal finance involving selling resources that belong to the business
This can provide immediate cash to the business.
What is a bank loan?
An external method of finance/money borrowed from a bank to be paid back with interest over a period of time
Bank loans are commonly used for larger investments.
What are business angels?
Individuals who invest in a business in exchange for a stake in the business (shares)
Business angels often provide not just capital but also mentorship.
What is crowdfunding?
An external source of finance where a large number of individuals provide funding for a business or project in return for shares/free products/discounts
Crowdfunding is often facilitated through online platforms.
What is external finance?
Money raised from outside the business
External finance can include loans, investments, and grants.
What is a grant?
A sum of money given by a government or other organisation that does not need to be repaid and no interest is charged
Grants are often used to support specific projects or initiatives.
What is leasing?
A contract to acquire the use of resources such as property or equipment
Leasing allows businesses to use assets without purchasing them outright.
What is a loan?
An external source/method of finance; amount of money borrowed, usually repayable after a fixed term of more than 12 months
Loans can be used for various business needs, typically requiring collateral.
What is an overdraft?
A business has a negative balance in their bank account because the amount withdrawn is greater than the current balance
Overdrafts provide short-term financial support but can incur high fees.
What is share capital?
The finance raised by a business issuing/selling new shares
This method dilutes ownership but raises funds for expansion.
What is trade credit?
Where a firm receives stock/inventory/raw materials from a supplier, which it does not have to pay for until later
Trade credit helps manage cash flow by delaying payment.
What is venture capital?
An external source of finance when the business issues shares to a small number of investors in return for a capital injection into the company
Venture capitalists often seek high returns on their investments.
What is a liability?
An obligation to pay another person/lender/supplier
Liabilities represent debts that a business must settle.
What is limited liability?
The obligation of a shareholder for the debts of a business is limited to the value of their investment
This protects personal assets of shareholders.
What is unlimited liability?
The obligation of a business owner to cover all the debts of the business
This can risk personal financial security for sole traders.
What is a business plan?
A document giving details of various aspects about the business to provide a strategic look and attract investors
It typically includes product details, costs, revenues, and cash flow forecasts.
