Prelim

• What is included in owners capital?

  Personal savings and borrowed money
• What are retained profits?


  Profits held back from previous years
• What does share issue refer to?

  Selling of shares in the business
• What is meant by sale of assets?

  Selling something no longer needed
• What is a bank overdraft?

  Spending more money than in the bank account
• What is a government grant?

  Money given from the government that doesn't need to be paid back
• What is a bank loan?

  A bank agrees to lend money for a period
• What is a commercial mortgage?

  A large sum borrowed secured on property
• What are common cash budget problems?

  • Negative closing balance
  • Increasing wages
  • Increasing purchases
  • Rising electricity costs
  • Increasing rent
• What are solutions to cash budget problems?

  • Obtain a bank loan or overdraft
  • Cut overtime to reduce wages
  • Find cheaper suppliers
  • Seek a cheaper electricity supplier
  • Consider buying rather than renting premises
• What are variable costs?

  Costs that change with output or sales
• What is sales revenue?

  Money made from selling goods or services
• How is cost of sales calculated?

  [Opening inventory + purchases] - closing inventory
• What is opening inventory?

  Stock at the start of the year
• What is closing inventory?

  Stock at the end of the year
• What is gross profit?

  Profit from buying and selling products
• How is gross profit calculated?

  Sales revenue - cost of sales
• What are expenses?

  Running costs throughout the year
• What is profit for the year?

  Profit after expenses are deducted from gross profit
• What is the purpose of an income statement?

  • Organize profit information
  • Monitor profit levels
  • Assess financial performance
• What are the objectives of the private sector?

  Survival, profit maximization, and growth
• What are the objectives of the public sector?

  Keep within a budget and provide services
• What are the objectives of the third sector?

  Raise awareness for good causes
• What are the interests of each stakeholder?


  • Employees: Wages and working conditions
  • Managers: Promotions and profits
  • Customers: Quality products and value
  • Suppliers: Prompt payments and orders
  • Government: Job creation and pollution control
• What are the advantages of sole traders?

  • Easy to set up
  • Quick decision-making
  • Profits do not have to be shared
• What are the disadvantages of sole traders?

  • Difficult to raise finance alone
  • Unlimited liability
  • Health issues affect business operations
• What internal factors impact business performance?

  • Leadership and management skills
  • Employee skills and quality
  • Finance available
  • Technology available
• What are the costs of field research?


  Expensive to collect, difficult to decide what questions to ask and collection of data is very time consuming
• What are the benefits of field research?


  Up-to-date information, information not available to competitors and relevant to purpose
• What are the methods of distribution?

  • Road: Using lorries
  • Air: Using aircraft
  • Sea: Using ships
  • Rail: Using trains
• What is the product life cycle?

  Stages a product goes through from introduction to decline
• What are the consequences of NOT using target marketing?


  • Poor reputation
  • Weakened customer relationships
  • Missed opportunities
• What is the importance of customer feedback?

  Helps improve marketing strategies
• What are the benefits of selling online?


  Access to a worldwide market

  Delivers straight to door

  24/7 delivery
• What are the stages of the product life cycle?

  1. Introduction
  2. Growth
  3. Maturity
  4. Decline
• What happens during the introduction stage of a product life cycle?


  Product is new to the market
• What happens during the growth stage of a product life cycle?

  Sales are increasing and profits are rising
• What happens during the maturity stage of a product life cycle?

  Sales peak and competitors enter the market
• What happens during the decline stage of a product life cycle?

  Sales decrease and product may be discontinued
• What are the benefits of environmentally friendly practices in business?


  • Reduces waste
  • Minimizes pollution
  • Meets government legislation