Karteikarten
Business Terminology and notes
Karten in diesem Stapel (69)
- 1Bank loanMoney from a bank which you borrow and then pay back with interest
- 2Board of directorsTo make major decisions that will affect the owners. Made up of directors that run the business in the interest of the owners.
- 3BudgetThe money available to spend on your company (guideline)
- 4Corporation TaxA tax that must be paid by a corporation based on the amount of profit generated
- 5CVCurriculum Vitae;
A short document that gives the main details about a candidate - 6EconomyThe management of incomes, expenditures etc. in a business
- 7ExpenditureThe total amount of money a company expects to spend
- 8Government GrantFinancial help from the government which you don't have to pay back
- 9Interest rateA percentage of the money given that has to be paid back extra
- 10OverheadsA cost which cannot be identified with a particular unit of output
- 11Personal SavingsCurrent disposable personal income
- 12Gross ProfitThe amount of profit a business makes after direct costs have been subtracted from turnover
Gross profit = turnover - costs of sales - 13Net ProfitThe amount of profit after all costs have been subtracted from turnover
Net profit = gross profit - overheads - 14Profit and loss accountA financial statement that summarises the financial transactions for a business over a period of time
- 15Quarter of a yearA three month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends
- 16RiskA situation involving exposure to danger
- 17Starting capitalThe money that is required to start a new business, whether for office space, permits, licenses, inventory, product development, manufacturing etc.
- 18StrategyA plan of action designed to achieve a longterm or overall aim
- 19TradingThe action or activity of buying and selling goods and services
- 20EntrepreneurA person who takes the risk in starting a new business
A person who organises , operates, and assumes the risks of a business venture - 21Short term financeMoney used to finance activities that are usually going to last less than one year. It is used to manage the day to day expenditures of the business.
- 22Long term financeMoney that will be needed for a long period of time- usually over a year, possibly for many years. It tends to be used for setting up and expanding a business.
- 23Bank LoanLong term borrowing for high value purchases
- 24Bank overdraftShort term- up to a certain limit of negative balance allowed
- 25Venture CapitalistLong term- give money in return for a share in the business
- 26Sole traderA type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business
- 27PartnershipA legal form of business operation between two or more individuals who share management and profits
- 28Private Limited CompanyA type of company that offers limited liability, or legal protection for its shareholders but that places certain restrictions on its ownership
- 29Public limited companyA company which has offered shares to the general public and has limited liability. A Public Limited Company's stock can be acquired by anyone and holders are only limited to potentially lose the amount paid for the shares
- 30Not for Profit BusinessA not for profit organization is a type of organization that does not earn profits for its owners. All of the money earned by or donated to a not for profit organization is used in pursuing the organization's objectives. Typically not for profit organizations are charities or other types of public service organisations.
- 31Retained profitYou use the profit from last year; 'ploughing profits back into the business'
- 32Personal sourcesSources from the owners that are used to finance the business, these can include; savings, inheritance, redundancy payments etc.
- 33Ordinary share capitalYou become a limited company and sell shares to raise finance
- 34ProfitThe money you are left with after you've paid your costs.
Total sales - total costs
Contribution - fixed costs - 35Cash flowThe money going in and out of the business
- 36Fixed costsCosts that you have to pay even if you do not sell or make anything
- 37Variable costsCosts that change as your business grows
- 38Breaking evenWhen you have made enough money to cover all your costs- all money you make after breaking even is profit
total revenue = total costs - 39RevenueMoney made before taking way the costs
selling price x quantity sold - 40Loss Profit Breakeven Total costsCosts > sales
Sales > costs
Costs = sales
Fixed costs + variable costs - 41ContributionThe difference between revenue and variable costs of production.
- 42Total contribution Contribution per unitTotal revenue - Total variable costs
Contribution per unit x no. of units sold
Selling price per unit- Variable costs per unit - 43Margin of safetyDifference between break even number of output and current level of output
- 44Breakeven outputFixed costs / Contribution per unit
- 45Finance is needed for;-Business set up
-Day to day trading
-Growth and development - 46Key considerations with finance-How much finance is needed
-When & how long finance is needed for
-What security (if any) can be provided
-Whether the entrepreneur is prepared to give up some control (ownership) of the start-up in return for investment - 47Internal investmentsMoney from inside the business
- 48External investmentsMoney from outside the business
- 49Advantages to a bank loan Disadvantages to a bank loan-More money available to borrow
-Easy to plan your expenses
-If you miss a payment or can't pay it back then your credit score will go down and you may get into financial trouble
-Has to be secured on an asset - 50Advantages of bank overdraft Disadvantages-Much more flexible, can borrow at any time and any amount up to your limit
-High interest rates
-Bank can lower overdraft limits or ask for repayments at any time - 51Advantages to government assistance Disadvantages-Normally you don't have to pay any more back (grant) or you get it at cheaper rates (loan)
-Selling point; proves you have set up in an area of high unemployment
-Time consuming to prove your business deserves the money
-Involves a lot of paperwork - 52Advantages to venture capitalist Disadvantages-You get a lot of money and experience
-Provides the required capital for expansion
-Have to give up a stake in your company (loss of ownership)
-Lose some of the profits
-Expensive to set up - 53Advantages of a sole trader Disadvantages-Simple; no structure, documentation
-Finance; everything you make is yours
-You get to make your own decisions
-No set wage
-Have to do everything; jobs that aren't your strengths
-Risk; liable for all debts that come into your business meaning you can lose assets
-Difficult to expand whilst staying as a sole trader (limits capital growth) - 54Advantages of a partnership Disadvantages-All partners have equal share in say of what happens
-Share of profits
-Wider range of skills
-Not on your own in a problem
-Self employed
-Can't just do what you want
-Might have different ideas about what to do
-If one partner leaves, a whole partnership can dissolve
-Risk; more debt per person - 55Advantages of a private limited liability company Disadvantages-Reduced risk; keeps business and personal lives separate. Protects assets.
-If a shareholder leaves it is easier to sort out than a partner leaving
-Easier to raise capital
-Legal formalities; have to keep all documentation to check
-More open to scrutiny; easy for rival businesses to see what is happening in your business
-Less flexible; money not yours - 56Advantages of a public limited liability company Disadvantages-Limited liability; protects assets
-Raises profile; known around
-Need professional advice; expensive
-More open to scrutiny
-Anyone can buy shares; someone else could buy more and more shares until they have over 50%; giving them control! - 57Advantages of a not for profit business Disadvantages-Helps achieve ethical goals
-Easier to raise money; people invest because of a conscience
-Able to take limited liability status
-Have to make lots of information available so people invest
-When people start running out of money they stop investing
-Low pay, long hours; employee stress - 58Advantages to retained profit Disadvantages-No interest; unlike bank loans
-Lots of control of business
-Doesn't cost you any extra
-Good for businesses that can't persuade banks to loan them money
-You have to wait for it, and earn it
-Hard if your business makes a lot, especially common in early years
-Owners earn less from business - 59Advantages to personal sources Disadvantages-Quick access to money
-Handy for businesses with low credit score; they may not be able to take out a loan
-Has to be secured on assets which could be repossessed
-Intertwines personal life and business; meaning not only the business could go bankrupt but so could you - 60Advantages to ordinary share capital Disadvantages-Quick, sudden injection of lots of money.
-No interest
-Best way to get large amount of money to invest in the business
-Lose % of the business
-Lose some profits
-Lose control - 61How can you increase sales?To increase quantity sold;
-cut the price
-offer volume-related incentives
To achieve a higher selling price;
-look to add value rather than simply increase price
-does market research suggest that prices are too high or too low? - 62Footie & Co sells footballs priced at £7.45 each. In a month they sell 234 footballs. Calculate their sales revenue for the month.234 x £7.45 = £1743.30
- 63In 2010 Ahmed's Toys had a revenue of £3.2M, fixed costs of £2.75M and variable costs of £530 000. Calculate their profit (loss) for 2010.£2.75M + £530 000 = £3 280 000
£3.2M - £3.28M = (£80 000)- Loss - 64The Pizza Palace has fixed costs of £50 000 per annum. The variable costs are £2.35 per pizza and the average price of a pizza is £6.00. The forecast for the next 6 months is 2500 customers per month. Calculate the profit (loss) for this 6 month period.FC = £25 000
VC = £35 250
TC = £60 000
Revenue = £90 000
Profit/Loss = £90 000 - £60 250
£29 750 profit - 65Methods of calculating break-even-A table (or spreadsheet) showing sales and costs over different levels of output
-A graph which charts sales & costs
-A formula which you can use to calculate break-even - 66Strengths of break-even forecast Limitations-Allows you to calculate the rough no. of units needing to be sold in order to make a profit
-Can help stop over or under production
-Helps you find the margin of safety
-Allows you to see if you should go through the business or not (break-even might be too high)
-Quick and easy to do
-Not as accurate as lot of assumptions;
-you have to assume your selling price stays the same regardless of the amount sold
-you have to assume that you will sell all output
-you have to assume fixed costs will stay the same (you might need to move warehouses or something) - 67Reasons to produce a cash flow forecast;-Identify potential shortfalls in cash balances
-Make sure the business can afford to pay suppliers and employers
-Spot problems with customer payments
-As an important part of financial control
-Provide reassurance to investors and lenders that the business is being managed properly - 68Sale and LeasebackArrangement in which one party sells a property to a buyer and the buyer immediately leases the property back to the seller. This arrangement allows the initial buyer to make full use of the asset while not having capital tied up in the asset.
- 69And what else to revise (ignore if not me)-Look at how to draw breakeven graphs
-How to answer exam qs
-Look through book to see what have missed
-Read chapters; 1, 2, 3, 5, 10, 11, 13, 16, 17, 18, 19, 20 Business Studies AS Level Fourth Edition
Informationen
- Beschreibung
- Terminology for AS Level Business Studies.
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