1
Q
what is limited liability?
A
where a business owner is only liable for their initial investment should they fall into debt
LTD+PLC
2
Q
what is unlimited liability?
A
if a business falls into debt, the owner must pay even if it includes selling personal possessions
sole traders + partnerships
3
Q
what is a business plan?
A
a document which sets out the future plans for a business
4
Q
give 3 purposes of a business plan
A
- helps obtain bank loans
- sets business objectives
- outlines organisation (efficiency)
5
Q
what does a cash flow forecast display?
A
where the business may have a shortfall of cash
can help arrange where short term loans are required
6
Q
what is break even?
A
the point at which total revenue = total costs
7
Q
what is contribution?
A
how much each unit produced contributes to the fixed costs
8
Q
what is the formula for break even?
A
total fixed costs/ contribution per u
9
Q
what is margin of safety?
A
the number of sales that could be lost before the business makes a loss
10
Q
what is the formula for margin of safety?
A
actual sales - break even sales
11
Q
what is a budget?
A
an estimate of income or outflow of a set period of time
12
Q
what is a variance?
A
a change to a budget
13
Q
what are the 4 purposes of a budget?
A
planning
communication
forecasting
motivation
14
Q
what is a historical budget?
A
a budget based off of current and past financial performance
15
Q
what is a zero-based budget?
A
a budget set based off of potential performance
16
Q
what is favourable variance?
A
a department has underspent, increasing profit
17
Q
what is adverse variance?
A
a department has overspent based off of a variety of reasons
18
Q
name 3 difficulties of budgets
A
- inflexible and difficult in dynamic markets
- can be demotivating
- managers often increase spendature to reach the budget
19
Q
what is the formula for gross profit margin?
A
gross profit/ revenue x 100
20
Q
what is operating profit?
A
gross profit - expenses ( other costs to a business aside from stock)
21
Q
what is the formula for Net profit margin?
A
net profit/ revenue x 100
22
Q
what are the 3 types of profit?
A
gross profit
net profit
operating profit
23
Q
what is liquidity?
A
the ability of a business to turn its assetys into cash to pay liabilities
24
Q
what are the 2 ways to measure liquidity?
A
- current ratio
- acid test ratio
25
give 3 ways on how to improve liquidity
1. increase long term borrowing
2. reduce stocks held
3. reduce the credit period offered to customers
26
what is working capital?
the day to day fincances required to run a business
27
what are the 4 methods of production?
1. job
2. batch
3. flow
4. cell
28
what is cell production?
workers are organised into different teams responsible for different parts of the product
29
what is job production?
high quality products are made one at a time specialised for the customer
30
what is batch production?
goods are made in batches and can be switched out for another good on the production line
31
what does productivity measure?
how hard an employee or machine is working
32
give 2 ways productivity can be improved
1. productivity bonus
2. investment into new machinery
33
give 2 factors which influence productivity
1. quality of inputs in production process
2. organisation of workers
34
what is economies of scale?
the higher the productivity, the costs fall for each unit
| allows to charge competitive pricing
35
what is labour intensive production?
making products with mainly human efforts
36
what is capital intensive production?
making products with mainly machinery and equipment
37
what is capacity utilisation?
the extent to which the max capacity for output is used
38
what is over-utilisation?
where a business cannot match the number of orders they sold
39
what does low capacity utilisation lead to?
increase in costs due to E.O.S
40
what is a current asset?
assets expected to be converted to cash within a year
41
what is a current liability?
liabilities due to be payed within a year
42
what is a balance sheet?
a fincancial statement which reports a firms assets, liabilitys and shareholder equity at a point in time
43
what are the 2 types of budgets?
1. favourable
2. adverse
44
what are 3 internal sources of finance?
1. personal savings
2. share capital
3. retained profit
45
what are 3 external sources of finance?
1. bank loans
2. venture capital
3. crowd funding
46
what is crowd funding?
a campaign to raise finances, typically a small amount of money from a large number of people.
47
what do people get in return for crowd funding?
1. products
2. equity
3. interest on repayments
48
what is trade credit?
a period where a business does not have to pay their suppliers, allowing for stock to sell before payment.
49
give 2 pros and cons of internal finance
1. no dividends or equity payed
2. not in debt to anyone
1. personal finances at risk
2. may restrict business growth with limited funds
50
give 2 pros and cons of external finance
1. personal finance is not at risk
2. large funding is more accessible for growth
1. equity and shares are often required
2. the business has another liability
51
what is seed capital?
the initial funding needed to start a business and cover operational costs until revenue is made
52
what is a debenture?
a long term debt instrument used to raise capital e.g an investor at an interest rate
53
what are 3 crowd funding cons?
1. failiure to meet expectations damages brand image
2. loss of control may occur resulting in conflicts over business direction
3. resources may be wasted if the campaign is unsuccessful
54
what are 3 pros of cash flow forecasts?
1. anticipates required cash in periods, allowing for planning
2. identifies seasonal trends, allowing the business to manage cash accordingly
3. boosts investor confidence by showing the business is financially responsible
55
what are 3 cons of cash flow forecasts?
1. forecasts are based on estimates and are less reliable due to unforseen circumstances.
2. overconfidence based off of cash flow forecasts may lead to risky decisions
3. regular updates may be time consuming.
56
give 5 contents of a business plan
1. cash flow forecast
2. organization and management
3. marketing strategy
4. operation plan
5. required funding
57
what is a closing balance?
the net cash flow at the end of a period
58
what is liquidity?
the ability of a business to pay off its liabilities based off of assets.
59
what is autocratic leadership?
where the leader makes all decisions on their own
60
what is paternalistic leadership?
where the leader makes the decisions themself but takes into account employee views
61
what is democratic leadership?
leaders who encourage participation in the decison making process
62
what is laissez-faire leadership?
leaders who allow employees to make their own decisions
63
what is lean production?
a productive approach which focuses on eliminating waste while maintaining quality
64
what is a buffer stock?
holding a certain amount of inventory incase of a sudden event
65
what is a disadvantage of lean production?
a bad relationship with suppliers may damage the brand image
66
give 3 ways to improve profitability
1. raise prices
2. reduce variable costs
3. reduce fixed costs
67
give 3 negatives of a business having too much cash
1. investment oc
2. asset oc
3. saving interest oc
| oc= opportunity cost
68
what is the ideal ratio for current and asset test ratio?
1. current = 1.5-2 : 1
2. acid = 1-1.5 : 1
69
give 2 pros of internal finance
1. no interest chargers
2. organised very fast
70
give 2 cons of internal finance
1. opportunity cost of capital use
2. may not be sufficient to reach goal
71
why dont unlimited liability firms use vc or business angels?
disincentive of investors due to higher risk
72
give 2 limitations of a cash flow forecast
1. based on estimates
2. PESTLE isn't reflected
73
what is a sale and leaseback agreement?
the selling of an asset to rent it back
| raises capital
74
give 2 limitations of break even analysis
1. reliant on estimated data
2. assumes all output is sold
75
what does the statement of comprehensive income show?
all income and expenses in the last 12 months
76
give 3 ways to improve liquidity
1. reduce credit period
2. sell and leaseback
3. introduce new capital
77
give 3 internal causes of business failiure
1. poor planning
2. lack of leadership
3. cash flow issues
78
give 3 external causes of business failiure
1. economic shocks
2. changes in c taste
3. legal factors
79
give 3 factors which change the method of production
1. level of output required
2. standardised vs customised
3. nature of product
80
give 2 pros and 2 cons of job production
1. high quality products
2. allows for customisation
but
1. production is slow
2. labour costs are high
81
give 2 pros and cons of batch production
1. fast production
2. economies of scale
but
1. money is tied up in stock
2. requires careful co-ordination
82
give 2 pros and cons of flow production
1. economies of scale
2. rapid production
but
1. cannot customise
2. capital equipment is expensive
83
give 2 pros and cons of cell production
1. workers share expertise, increasing productvity
2. high motivation as a team
but
1. requires extensive reorganisation
2. weaker workers slow team down
84
give 3 factors influencing productivity
1. employee motivation
2. education + training
3. investment in equipment
85
what is efficiency?
the ability to use resources as cost-effective as possible
86
give 3 ways to increase capital utilisation
1. increase consumer usage
2. outsourcing tasks
3. increase new sales
87
give 3 pros of lean production
1. less time required - organised
2. less labour required
3. higher quality
88
what is quality?
the ability to meet consumer needs and expectations
89
what is quality control?
inspecting the quality of output at the end of the production process
90
give 2 pros and 2 cons of quality control
1. ensures fit for purpose
but
1. rejection = waste
2. little focus on cause of defects
91
what is quality assurance?
inspecting the quality of goods throughout production
92
give 2 pros and cons of quality assurance
1. products can be reworked
2. prevents future defects
but
1. skilled workers needed (costs)
2. lengthens time of process
93
what are quality circles?
groups of workers meeting to solve identified production issues
94
give a pro and con of quality circles
1. reduces future defects
but
1. time consuming
95
what is total quality management?
quality is at the business core, every worker is responsible
96
give 2 pros and cons of TQM
1. improves efficiency
2. culture of constant improvement
but
1. continuous training costs
2. increases time of production
97
what is kaizen?
taking continuous steps to increase productivity by eliminating waste in production
| includes TQM, JIT, zero defects, automation
98
what is legislation?
laws and regulations passed by the govt that require businesses and firms to behave in a certain way
99
what are the 5 areas of legislation?
1. consumer protection
2. environmental protection
3. health and safety
4. employee protection
5. competition policy
100
give 2 cons of 100% capacity utilisation
1. inflexible to demand surges
2. increases staff turnover (burnout)
a level business
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