Applied business

• Main sections of business plan include: Nature of business, Aims and objectives, New product/service, Existing market, Marketing plan, Organisational plan.
• Nature of business section of business plan includes its history and legal structure.
• Aims and objectives section of business plan outlines the direction of the business and what it'll take to achieve their aims/objectives.
• Details of the new product/service being offered section of business plan informs customers about what is offered that is different from other products/services and how they'll benefit.
• Existing market section of business plan provides an outline of the existing marketing details such as the size of the market and existing number of competitors.
• Marketing plan section of business plan outlines how the product/service is being communicated to the customer.
• Organisational plan section of business plan outlines who the business is, how it will be managed and organised.
• Operational plan:

  How the product/service will be produced and delivered.
• Financial plan:

  A cash flow forecast, a projected profit and loss account and balance sheet for the end of the first year's trading. Details of the finance required and the forecasted rate of return.
• Long term objectives:

  Where the business hopes to achieve in 5 years time.
• Budget:

  A financial or quantative statement, prepared for a specific accounting period (typically a year), containing the plans and policies to be pursued during that period.
• Main purposes of a budget are:

  1. To monitor business unit and managerial performance
  2. To forecast the out-turn of the period's trading
  3. To assist with cost control
• A shareholder:

  A person, corporation or institution who owns stock in a company. A shareholder's rights and types can vary according on the company and the shares they possess.
• Limited Liability:shareholders are legally responsible for a company's debt only to the value of their shares.
• Annual return:

  A document that contains important information about a company such as its directors, shareholders, capital, debt and liabilities.
• Stock exchange:

  A system for buying and selling securities or stocks and bonds.
• Stock:

  A share in the ownership of a company.
• Bond:

  An agreement to lend money to a company for a certain amount of time. Companies sell securities to people to get the money they need to grow.
• Certificate of incorporation:

  You can start trading with this Certificate.
• Market research:

  Where you ask people questions in order to tailor the facilities to their wants/needs.
• Sources of finance:

  The options available to a business when seeking to raise funds to support future business actions.
• Internal sources of finance include:

  1. Owner's capital:personal savings
  2. Retained profit
  3. Sale of assets
• External sources of finance include:

  1. Family/friends
  2. Banks
  3. Peer to peer funding
  4. Business angels
  5. Crowd funding/other businesses
• Long term finance:

  Finances the whole business for over many years.
• Short term finance:

  Finances the day to day trading of the business.
• Trade credit:

  You can buy now and then pay later.
• Profit/loss formula:

  Total revenue-total costs
• Sales revenue:

  Price × quantity
• Surplus/deficit:

  Total income - Total expenditure
• Break even point:

  Fixed cost÷selling price -variable cost
• Contribution formula:

  Selling price - variable costs
• Margin of safety formula:

  Actual output - break even level of output
• Uses of break even include:

  1. Break even analysis is useful for setting minimum sales targets.
  2. Show possible investors your ability to potentially generate a profit.
  3. Asses impact of changing variables. For example, what will happen if a business lowers price in response to a new competitor
  4. Calculate profit and loss at different levels of output.
• Net cash flow formula:

  Cash inflows - cash outflows
• Opening balance:

  How much a business has at the start of each month. For a new business in month 1, this will be 0. The closing balance for one month becomes the opening balance for the next.
• Closing balance:

  How much the business has at the end of each month.
• Closing balance formula:

  Opening balance + net cash flow
• Cash flow:

  Cash flow is the movement of money into and out of a business over a specific period, reflecting the liquidity and financial health of the company.
• Positive cash flow:

  Occurs when there is more cash inflow than outflow, indicating the business is generating surplus funds.
• Negative cash flow:

  Happens when there is more cash outflow than inflow, signaling potential financial challenges.