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Business Studies GCSE > Unit 5 > Flashcards

Unit 5 Flashcards

1
Q

Start up Capital

A

The capital needed by an entrepenuer when first starting up a business

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2
Q

Working Capital

A

Working Capital - finds to pay for day to day costs, that do not involve buying equipment (something you would buy for the business on a day to day time, not heavy machinery)

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3
Q

Capital

A

Capital - the finance necessary for a business to carry out its plans (machinery, equipment, finance)

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4
Q

Venture Capitalist

A

Venture Capitalist - People who have a lot of experience in business and lend money to other businesses.

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5
Q

What are Current Assets and Non Current Assets (fixed)!?

A

CA: Assets that a business expects to convert into cash within 12 months (cash, inventories)

NCA: resources owned by a business which will be used for a period longer than one year

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6
Q

When do Businesses need finance?

A

When starting up - start up costs are initially hiring workers and buying the first bits of equipment for the business
Running costs - day to day running costs are Energy Bills and Rent
When Expanding - a cost of expanding are buying a new store when expanding in a new location
Replacing Fixed assets -equipment such as work vehicles usually last about 3 - 10 years, replacing fixed assets is when you replace or change these assets
Cash flow shortage - when a business is low on cash

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7
Q

Retained Profits

A

Retained Profits - the money that you have already made from the business going back in to the business.

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8
Q

What is Long Term Finance?

A

debt or equity used to finance the purchase of non current assets or finance expansion plans

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9
Q

What is short term finance?

A

loans or debt that a business expects to pay back in one year

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10
Q

What is Internal and External Finance?

A

Internal Finance comes from within the business or is provided by its owners

External Finance comes from outside the business or its owners.

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11
Q

Cash Flow

A

The movement of cash in and out of the business

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12
Q

What is a Cash Flow Forecast?

A

Cash Flow Forecast - Forecast or Estimate of your cash (bank balance) at the end of each week or month

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13
Q

How do you calculate the Net Cash Flow?

A

Net Cash flow = total inflow - Total Outflow

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14
Q

What is the Opening Balance?

A

Opening Balance = The Closing Balance of the Previous Month

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15
Q

How to calculate Net Profit

A

Net Profit = Gross Profit - Business Expenses

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16
Q

What is the Owners Equity?

A

Owners Equity - The money invested in the business

17
Q

What are some Internal Sources of Finance?

A

Owner’s Savings

Retained Profits

Some of the Businesses working capital

18
Q

What are External Sources of Finance in Short Term Sources and Long Term Sources?

A

Short Term Source - Overdraft: An agreement with the bank which allows a business to spend more money than it has in it’s account up to ana greed limit. The loan can be repaid within 12 months

Long Term Source - Bank Loan: Provision of finance by a bank which the business will repay with interest over an agreed period of time

Leasing: Obtaining the use of a non current asset by paying a fixed amount per time period for a fixed period of time

19
Q

What is Equity?

A

The Networth of the company

20
Q

What does a Balance Sheet show?

A

Shows the financial position of a business at a point in time
The idea is to check wether the business assets balances it’s liabilities-

21
Q

How to calculate Total Shereholder’s Equity?

A

Total Shareholder’s Equity = Share Capital + Retained Profit

22
Q

What is Debt Financing?

A

The act of raising capital by borrowing money from a lender or a bank, to be repaid at a future date.

23
Q

Equity Finance

A

selling a portion of a company’s equity in return for capital.
The process of raising capital through the sale of shares.

24
Q

What are Benefits and Limitations of Debt Financing?

A

Benefits: Doesn’t change the ownership of the company. The lenders have no way in the running of the company
Limitations: Interest is charged on the amount borrowed and this increases business costs. The amount borrowed must be repaid

25
Q

What are Benefits and Limitations of Equity Financing?

A

Benefits: It never has to be repaid
Limitations: The increase in shareholders dilutes the ownership of the company

26
Q

Cash Flow Forecast

A

an estimate of the future cash inflows and outflows of a business

27
Q

Net cash flow

A

cash inflow minus cash outflow

28
Q

income statements

A

a financial document that shows a summary of profit or loss in the year.

29
Q

Gearing ratio

A

The ratio of external finance to internal finance

30
Q

Trade Credit

A

Items are bought from suppliers on a buy now pay later basis

Business Studies GCSE (6 decks)

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