2.1+ 2.2 KEY TERMS

Question 1

internal finance

Answer 1

generated within the bus

(Saving, retained prof)

Question 2

S and L of internal finance

Answer 2

S- no interest flexible

L- cant raise large amount limit growth

Question 3

External finance

Answer 3

Generate outside the business
(Loan, bus angel, crowdfunding)

Question 4

F

Question 5

Limited liability

Answer 5

owner and business are seperate legal entity

(If in debt, owner can only lose investments into business)

Question 6

S and L of limited liability

Answer 6

S reduce risks and attract investor

L- inc legal obligations bc law protects the owner so in return it demands compliance

Question 7

Unlimited liability

Answer 7

owner lose all investments and assets if bus in debt

(Often sole trader)

Question 8

S and L of unlimited liability

Answer 8

S- full control of dec making, dont need to consult shareholders

Question 9

Business plan

Answer 9

shows how business will develop

Question 10

S and L of a business plan

Answer 10

S- highlights potential problems in future

L- time consuming to make

Question 11

Cash flow forecast

Answer 11

reciepts of cash inflows and cash outflows over future period of time

-used to control/monitor cash flow

Question 12

S and L of cash flow forecast

Answer 12

S- risk management and financial planning

L- based on estimates so lead to uncertainty

Question 13

Sales forecasting

Answer 13

prediction of sales revenue for product or whole business

(Measure performance in departments)

Question 14

S and L of sales forecasting

Answer 14

S- help budget and resource management

L- prediction so may be innacurate

Question 15

Time series analysis

Answer 15

method to predict future levels from past data

Question 16

Fixed cost

Answer 16

cost that dont change as output varies

Question 17

Variable cost

Answer 17

costs that do change as output varies

Question 18

Break even

Answer 18

Cash= profit

Question 19

S and L of break even

Answer 19

S- identify profitable prodcuts

L-ignore external factors

Question 20

Contribution

Answer 20

Profit a business makes on an indiv product

Question 21

Budget

Answer 21

plan of income and expenses expected in time period to plan

Question 22

L of budgets

Answer 22

If the data is innacurate leads to innacurate budget

-doesnt allow for unexpected circumstances

Question 23

Zero based budgets

Answer 23

Set Budget at £0 to force managers to justify every £ they spend

Question 24

Variance analysis

Answer 24

actual figure is better than the budgeted figure

Question 25

Adverse analysis

Answer 25

actual figure is worse than budgeted figure