Paper 2 topic 2 and 3-finance and influence on businesses

Question 1

what is finance

Answer 1

Finance: money raised and used by a business.

Question 2

what is finance function

Answer 2

Finance function: responsible for the management of money in a business.

Question 3

what is financial information

Answer 3

Financial information: data which details profit, loss, cash-flow, break-even, profit margin and rate of return for the business to use in decision making.

Question 4

what are assets

Answer 4

Assets are things the business owns e.g. any property

Question 5

what is liability

Answer 5

Liabilities are things the business owes to someone e.g. any bank loans

Question 6

why do business need finance

Answer 6

1.To established a new business.
2.To develop a new product launch.
3.To expand the business.
4.To pay for day to day operations
5.Recruitment
6.Marketing.

Question 7

what is trade credit

Answer 7

Trade Credit: When you buy now and pay later to your suppliers.

Question 8

what is crowdfunding

Answer 8

Crowdfunding (External): An online platform where businesses post a video about their business to attract investors around the world.

Question 9

what is an advantage and disadvantages for crowdfunding

Answer 9

-can raise money from the public
disadvantages-interests is paid on loans

Question 10

what is sales revenue

Answer 10

Total sales Revenue is the money generated from selling goods and services.

Question 11

what is the formula for sales revenue

Answer 11

Total Sales Revenue = Units Sold x Selling Price

Question 12

what is the formula for total cost

Answer 12

Total Costs = Fixed Cost + Variable Cost

Question 13

what is the formula for fixed cost

Answer 13

Total Fixed costs = All fixed costs added
together

Question 14

what is the fixed cost

Answer 14

Fixed costs do not change depending on
number of units sold. They have to be
paid even if the firm business produces
nothing.(EG-RENT)

Question 15

what is a variable cost

Answer 15

Variable costs that changes depending
on number of units sold.

Question 16

what is the formula for variable cost

Answer 16

Total Variable costs = number of units
sold x variable costs per unit

Question 17

what is the formular for profit/loss

Answer 17

sales revenue-total cost

Question 18

what is cost of sales

Answer 18

All of the costs which must be paid for in order to make a specific product.

Question 19

what is gross profit

Answer 19

the selling price of your product minus the cost of producing it

Question 20

gross profit formula

Answer 20

Gross Profit = Revenue – Cost of Goods Sold.

Question 21

what is net profit

Answer 21

the actual profit after working expenses not included in the calculation of gross profit have been paid.

Question 22

what is the formula for net profit

Answer 22

gross profit - operating expenses and taxes

Question 23

what is cash

Answer 23

Money held by a business on the
premises and in bank accounts

Question 24

what is profit

Answer 24

The amount a business has made after
subtracting total costs from revenue.
They can have a lot of cash but make no
profit. The business may also make profit
but have no cash.

Question 25

what is the formula for cash inflows

Answer 25

Cash inflows – any flow of cash into a business

Question 26

what is cash outflows

Answer 26

Cash outflows – any flow of cash out of a business

Question 27

examples of cash inflow

Answer 27

1.Sales of products 2.Bank loans 3.Government Grants 4.Personal saving from the owners

Question 28

what are some examples of cash outflow

Answer 28

1.Rent & Rates 2.Payment to suppliers 3.Wages & Salaries 4.Utility Bills

Question 29

what is the formula for gross profit margin

Answer 29

(Gross Profit / Sales Revenue) x 100

Question 30

what is the meaning of gross profit margin

Answer 30

Shows how profitable a product is per unit sold!

Question 31

what is ethical decisions

Answer 31

Ethical decision - a morally correct decision that has a positive impact on stakeholders or the environment.

Question 32

what are pressure groups

Answer 32

Pressure groups - an organisation that aims to influence businesses to act ethically.

Question 33

what is GDP

Answer 33

GDP - The total value of production and spending of goods and services within an economy over a period of time.

Question 34

WHAT IS THE ECONOMIC CYCLE

Answer 34

An economic cycle is the circular movement of an economy as it moves from expansion to contraction and back again. Economic expansion is characterised by growth and contraction, including recession, a decline in economic activity that can last several months.

Question 35

WHAT ARE THE ECONOMIC CYCLE (HINT- THERE IS 3)

Answer 35

Boom - when the economy’s GDP has peaked. Consumer incomes are high and employment rate is high. Recession - when the economy GDP has dropped. Consumer incomes are low and employment levels are low. Recovery - when the economy’s GDP rises again after a fall. Consumer incomes are rising and employment is also rising.

Question 36

what does boom consists of

Answer 36

High employment High consumer income Businesses are likely to experience higher sales.

Question 37

what does recession consist of

Answer 37

Low employment Low consumer income Businesses are likely to experience lower sales especially for luxury goods.

Question 38

what does recover consist of

Answer 38

Increasing employment Increasing consumer income Businesses are likely to consider investing more money into growing their business again.

Question 39

if unemployment Increases - how would it impact each factor

Answer 39

Demand- Demand of inferior goods may rise. Recruitment- People without jobs are looking for jobs, this may make recruitment easier as there is a larger labour pool to choose from. Wages- Larger labour pool, so businesses can offer lower wages when there are lots of jobless people who are looking for a job at the same time. Training- If people are unemployed for a long term, they need to be reskilled and require more training.

Question 40

what is interest rates

Answer 40

The cost of borrowing and the reward for saving money expressed as a percentage.

Question 41

what is inflation rates

Answer 41

The persistent increase in prices of goods and services over period of time. Expressed as a percentage.

Question 42

what is exchange rates

Answer 42

The value of one currency against another currency. Expressed as a ratio.

Question 43

what is appreciation and depreciation

Answer 43

Appreciation means the currency is becoming stronger For example: £1 = €1.15 to £1 = €2.05 Depreciation means the currency is becoming weaker For example: £1 = €2.05 to £1 = $1.15

Question 44

WHAT IS SPICED ACRONYM

Answer 44

Strong Pound Imports Cheaper Exports Dearer

Question 45

what is globalisation

Answer 45

Globalisation - The process by which the world is becoming increasingly interconnected as a result of increased movement of people and capital between nations.