Business

• What is the equation for interest rate?

  Interest rate = (Total repayment - Borrowed amount) / Borrowed amount x 100
• What is the equation for break-even point?

  Break-even point = Fixed cost / (Sales price - Variable cost per unit)
• What is the equation for closing balance?

  Closing balance = Opening balance + Net cash flow
• What are the advantages of writing a business plan?

  • Allows owner to take calculated risks
  • Convinces financial backers that the investment is sound
  • Reduces risk of failure
  • Sets objectives and aims
  • Informs business decisions for growth
• What are the key components of a business plan?

  • Business idea
  • Business aims and objectives
  • Target market
  • Location
  • Marketing mix
  • Finance (cash flow forecast, costs, revenue, profit)
• What are the objectives of a stakeholder?

  • Shareholders: Ensure business success and profit
  • Managers: Seek good salary and career progression
  • Employees: Desire good pay, job satisfaction, and security
  • Customers: Want quality products at reasonable prices
  • Suppliers: Expect timely payments and regular orders
  • Local community: Look for job opportunities
  • Pressure groups: Raise awareness of their causes
  • Government: Wants job creation for tax revenue
• What is an entrepreneur?

  An entrepreneur is someone who takes on the risks of enterprise activity.
• What are the risks in running a business?

  Risks include financial loss, lack of security, and potential failure.
• What are the rewards in running a business?

  Rewards include success, profit, independence, and a better quality of life.
• What is business enterprise?

  Business enterprise is the process of identifying new business opportunities and taking advantage of them.
• What are the purposes of a business?

  • Provide goods or services
  • Meet customer needs
  • Add value to existing products
• What is adding value to a product?

  Adding value is improving a product so customers are willing to pay more compared to competitors.
• How can a business add value?

  • Make a product more convenient
  • Build a good brand image
  • Improve design and quality
  • Create a unique selling point
• What are the main changes that influence business ideas?

  • Changes in technology
  • Changes in customer preferences
  • Changes in ideas
• What can the term market mean?

  • Place where goods are traded
  • Trade in a specific product
  • Potential customers for a product
• What is market size?

  Market size is the number of individuals within the market who are potential buyers or sellers of products.
• What is market share?

  Market share is the proportion of total sales within a market controlled by a business.
• What are the factors that affect competition?

  • Price: Lower prices attract more customers
  • Customer service: Better service makes products more appealing
  • Quality: Higher quality allows for higher pricing
  • Product range: A larger range attracts more customers
  • Location: Strategic location can influence competition
• What are customer needs?

  Customer needs include price, quality, choice, and convenience.
• What is market segmentation?

  Market segmentation is the process of splitting up a market into different sectors or groups.
• What can a business find from mapping the market?

  • Competitors selling similar products
  • Gaps in the market
• What are business financial aims?

  • Survival
  • Maximize profits
  • Increase number of sales
  • Increase market share
  • Financial security
• What are non-financial business aims?

  • Personal challenge
  • Personal satisfaction
  • Independence and control
  • Moral drive
• What is the equation for total variable cost?

  Total variable cost = Variable cost per unit x Quantity sold
• What is the break-even point?

  The break-even point is the quantity at which total revenue and total cost are equal.
• What is the margin of safety for a business?

  The margin of safety is the gap between the current level of output and the break-even output.
• What is the equation for net cash flow?

  Net cash flow = Cash inflow - Cash outflow
• Why do firms need finance?

  • For start-up capital
  • To cover costs
  • To cover shortfalls
  • For expansion
  • To meet day-to-day running costs
• What is trade credit?

  Trade credit is when suppliers allow debts for goods and services to be paid after delivery.
• What are the advantages of trade credit?

  • Allows selling goods at a higher price before payment
  • Helps maintain operations during poor cash flow
• What are the disadvantages of trade credit?

  • Costs can increase if debt is unpaid
  • Suppliers may refuse credit if payments are late
• What is an overdraft?

  An overdraft occurs when more money is taken out of the bank than deposited.
• What are the advantages of an overdraft?

  • Allows timely payments
  • Quick access to finance
• What are the advantages of loans?

  • Quick and easy to obtain
  • Lower interest rates
  • Designed to meet company needs
• What are the disadvantages of loans?

  • Banks can reclaim assets if interest is unpaid
  • Monthly installments can increase fixed costs
• What is share capital?

  Share capital is when shareholders invest money into the business.
• What is venture capital?

  Venture capital is money raised by selling shares to individuals who finance new or expanding firms.
• What is retained profit?

  Retained profit is the profit owners reinvest in the business after paying dividends.
• What are the advantages of being a sole trader?

  • Easy to set up
  • You can be your own boss
  • You keep all the profits
• What are the disadvantages of being a sole trader?

  • Unlimited liability
  • High competition from larger businesses
  • Limited access to finance
  • Unincorporated with no legal identity