Unit 1.3 - Putting a business idea into practice Flashcards
(30 cards)
What would you call “targets expressed in money terms such as making a profit, earning income or building wealth”
Financial objectives
What does the acronym SMART stand for?
Specific Measurable Achievable Realistic Timed
What does turnover mean and what else could you call it?
The amount of income received from selling goods or services over a period of time. Revenue, Sales Revenue, Sales Turnover
Formula for Total Revenue?
TR = P x Q
Price x Quantity
What is sales volume?
The number of items or products or services sold by a business over a period of time.
What are total costs and how do you calculate it?
All the costs a business has to pay.
TC= FC +VC
What do FC and VC stand for? What do they mean
Fixed costs - Costs that don’t change a business has to pay every E.G month (rent, eg)
Variable costs - Costs that depend on how often you use it E.G phone bill.
Occurs when the revenues of a business are greater than its costs.
TR - TC
Profit
The money going into and out of a business, can be positive or negative
Cash flow
What is the difference between inflow and outflow?
Inflow is the cash coming into a business E.G Loan
Outflow is the cash going out of the business E.G Rent
The receipts of a business minus its payments
Inflows – Outflows = …
Net cash flow
When does insolvency occur and what does unlimited/ limited liability have to do with it?
When a business can no longer pay off its debts. The owner(s) may have to sell their house if necessary (unlimited liability)
When shareholders of a company are not personally liable for the debts of the company; the most they can lose is the value of their investment in the shares of the company. (limited liability)
What would you call predicting cash flow?
Cash flow forecast
Opening Balance
The amount of money in a business at the start of the month
Closing balance
The amount of money in a business at the end of the month
Why might a business go on trade credit?
Where a supplier gives a customer a period of time to pay a bill (or invoice) for goods or services once they have been delivered - when a business is low on money they may need this
Stocks
Materials that a business holds. Some could be materials waiting to be used in the production process and some could be finished stock waiting to be delivered to customers.
What is the difference between Long term and Short term finance?
Sources of money for businesses that are borrowed or invested typically for more than a year e.g Mortgage, Venture Capitalist
Sources of money for businesses that may have to be repaid with immediately or fairly quickly, usually within a year E.G Overdraft
Money that has been set aside and not spent by individuals and households.
Personal savings
Share Capital
The monetary (money - tary) value of a company which belongs to its shareholders, for example, if five people each invest £10,000 into a business, the share capital will be £50,000
What are shareholders and what type of business can have these?
PLC (Public Limited Company), when a business sells parts of their ownership to the public
An individual or company which buys shares in what they hope will be a fast growing company with a long term view of selling the shares at a profit.
Venture capitalist
Borrowing a sum of money which has to be repaid with interest over a period of time, such as 1-5 years. Often from a bank
Loan
What is a loan where property is used as security?
Mortgage
