Theme 2 - Managing Business Activities

• Economic Variable


  Measures within the economy, which have effects on businesses and consumers
• Internal Finance


  The raising of capital from within the business
• Owner's Capital


  A source of finance provided by the owner of a business from the owner
• Retained Profit


  Profit reinvested back into the business which is not paid as dividends
• Sales Of Assets


  Type of internal finance, involves selling resources that belong to the business
• Bank Loan


  External method of finance in which money borrowed from a bank is paid back with interest
• Business Angels


  Individuals who invest between £10,000 and £100,000 in exchange for a stake in the business
• Crowdfunding


  Where large numbers of individuals provides funding a business in return for shares
• External Finance


  Money raised outside a business
• Grant


  Sum of money given by the government or other organisations
• Leasing


  Contract to acquire the use of resources such as property or equipment
• Loan


  Amount of money borrowed, usually repayable after a fixed term of more than 12 months
• Overdraft


  When a business has withdrawn a greater amount than the current balance. This is usually negative
• Peer-to-peer Funding


  A person lends money to another individual via online transaction
• Share Capital


  Finance raised by a business
• Trade Credit


  A firm receives stock from a supplier, which it does not have to pay for until later
• Venture Capital


  External source of finance when the business issues shares to a small number of investors in return for a capital injection into the company
• Liability


  Responsibility for the financial debts of the business
• Limited Liability


  Amount of company's losses that a shareholder is liable for is limited to the amount they have invested in the company
• Unlimited Liability


  Legal status which means that business owners are liable for all business debts
• Business Plan


  A document giving details of a variety of aspects about the business in order to prove a strategic look and to attract investors
• Cash Flow


  The movement of cash in and out of a business in a period of time
• Cash Inflow


  Flow of money into a business
• Cash Outflow


  Flow of money out of a business
• Cash Flow Forecast


  Predicted flow of cash in and out of a business over a period of time
• Closing Balance


  Net cash flow + cash outflows
• Net Cash Flow


  Cash inflows - cash outflows
• Opening Balance


  What is in the bank on the first day of the month
• Consumer Trends


  Habits of those involved in the use of goods and services
• Economic Uncertainty


  When firms are unable to predict their future sales
• Sales Forecast


  Prediction of the expected level of sales
• Average Cost


  Total costs / output
• Fixed Cost


  Costs that do not change when sales change
• Revenue


  Amount of income for a business generated from its sales
• Sales Revenue


  Selling price × sales revenue
• Total Costs


  Total fixed costs + total variable costs
• Variable Costs


  Costs that do not change when output change
• Break-even


  Level of output where the total revenue is equal to the total costs
• Unit Contribution


  Selling price - variable cost per unit
• Margin Of Safety


  Difference between the current level of output and the break-even level of output