Year 12 mock Flashcards

(40 cards)

1
Q

disadvantages of owners capital

A
  • threat to family finance

- only a certain amount

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2
Q

internal sources of income

A
  • owners capital
  • retained profit
  • sale of assets
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3
Q

benefits of owners capital

A
  • no interest
  • owners control
  • dont repay
  • risking own savings can be motivation
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4
Q

benefits of retained profit

A
  • avoids interest

- doesnt dilute business ownership

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5
Q

disadvantages of retained profit

A
  • only possible if there is sufficient retained profit
  • could cause upset with shareholders
  • reduces security blanket
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6
Q

sale of assets benefits

A
  • no interest
  • lump sum injection
  • could turn obsolete asset into finance
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7
Q

disadvantages of sale of assets

A
  • one off option
  • expensive in long run if they need to lease back the item
  • loss of asset and future value
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8
Q

sources of external finance

A
  • family and friends
  • bank
  • peer-to-peer funding
  • business angels
  • crowdfunding
  • other businesses
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9
Q

methods of external finance

A
  • loans
  • share capital
  • venture capital
  • overdrafts
  • leasing
  • trade credit
  • grants
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10
Q

business angels

A

wealthy individuals make investments into start-up businesses for a share

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11
Q

share capital advantages

A
  • no interest
  • possible to raise large amounts of finance
  • only need to pay dividends if a profit is made
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12
Q

share capital disadvantages

A
  • loss of ownership

- costly processes of issuing shares

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13
Q

venture capital

A

investment from a wealthy business to a smaller business

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14
Q

Reason of a sales forecast

A

To help inform cash-flow forecasts, people needed, resource management and marketing

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15
Q

Factors affecting sales forecasts

A

Consumer trends, competitors actions, economic variables

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16
Q

Problems with sales forecasts

A

External shocks, future is unknown, past data may not be reliable

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17
Q

Contribution equation

A

Selling price-variable cost per unit

18
Q

Break even point equation

A

Fixed costs/contribution

19
Q

Margin of safety definition

A

The output above the break even point

20
Q

Strengths of break even

A

Calculate levels of loss/profit, provides a target, aids decision making, integral part of a business plan

21
Q

Weaknesses of break even

A

Based on predicted costs and revenue, fixed costs can vary especially in the long run

22
Q

Current ratio

A

Currents assets:currents liabilities

23
Q

Acid test ratio

A

Currents assets-stock: current liabilities

24
Q

Working capital definition and equation

A

The measure of a firm’s liquidity

Current assets-currents liabilities

25
Productivity equation
Output/input
26
Labour productivity
Total output/number of employees
27
Factors of machinery productivity
- age - training of operatives - quality of inputs
28
Difficulties in increasing labour productivity
- may negatively impact quality of product | - employees may feel exploited
29
Total equity
Share capital+retained profit
30
Opportunity cost
The benefit lost of the next best alternative
31
Trade offs
All of the alternatives
32
Market share
Sales of firm/total sales x100
33
Market value
Units sold x price
34
Product life cycle
- development - introduction - growth - maturity - decline - extension
35
Boston matrix
- cash cow- high share, low growth - rising star-high share and growth - problem children- low share, high growth - dogs- low share and growth
36
Product portfolio
Range of products and brands under the control of a firm
37
B2B
Industrial markets where businesses sell to other businesses, the actual product matters more than the brand name
38
Added value equation
Selling price-inputs of product
39
B2C
Consumer markets where businesses sell to the public, product and price are more important
40
Added value benefits
If a product has a strong brand it can add value and charge premium prices for their products