schedule 2 revision Flashcards
(33 cards)
revenue expenditure
money spent on operational costs e.g. rent
capital expenditure
money spent on long term items e.g. machinery
name 3 internal ways of finance
personal savings, retained profit, sale of assets
personal savings
no interest and repay. may not have enough, opportunity cost
retained profit
no interest or pressure on cash flow. Shareholders may object and may not be enough
sale of assets
no interest or pressure on cash flow. May need it in future or may not have many/ none.
name 3 sources of external finance
family/ friends, banks, crowd funding
loans
money is back with interest and banks need security. Can be repaid over a long period of time and is a fast source.
share capital
PLC and LTD sell shares (PLC on stock market). The more shares sold the less control, less privacy. No regular payments and safer.
overdrafts
taking more money out than they have. Interest is high, can be cancelled whenever. Flexible, no monthly costs.
venture capital
invest in growing businesses. Fast growth, no monthly payments. Growth expectations, can lose money.
leasing
renting but not owning monthly. Expensive and you never own it. Flexible and money doesn’t have to be paid upfront.
trade credit
buy now pay later. New businesses low chance, interest high. Improves cash flow, better reputation.
unlimited liability
owners liable for all debts. Harder to grow due to financial risks. Can lose personal possessions.
grants
no need to be repaid, cheap. Has to be used in specific way only, hard to get one (competition).
crowd funding
raising money from loads of investors giving small amounts. No interest, lots of investors. Some loss of control, may not work.
limited liability
owners only loose the money they have invested. They have separate legal identity to business.
business plan definition
document with idea, how it will be financed, marketed and put into practise.
name the 7 parts of business plan
ex. summary, product, market, marketing plan, operational plan, financial plan, conclusion.
what is involved in the marketing plan bit
who is being targeted and how
what is involved in the operational plan bit
how will it be produced and delivered
benefits and drawbacks of business plan
direction, focus, monitors progress, good for banks. Time, effort, changes, hard to predict future.
cash inflows e.g…
cash, loans, retained profit
cash outflows e.g..
salaries, wages, materials, rent
