Theme 2

• Sale of Assets


  Selling equipment
• Leasing


  Hiring Equipment so cash isn’t invested all at once
• Owner Capital


  The owners personal savings
• Retained Profit


  Profit which was made in previous years
• Overdraft


  Using more cash than there is in a bank account (debt)
• Business Angel


  Private individual who invests assets into a business
• Crowdfunding


  Cash raised by the public online
• Peer to Peer Lending


  Lending money to a business
• Trade Credit


  Paying suppliers at a later date (buy now, pay later)
• Share Capital


  Cash raised by selling shares on the stock market
• Grant


  A sum of cash given to a business for a project
• Venture Capital


  Investors provide money to start or expand a business
• Profit

  Total Revenue - Total Costs
• Loan


  A sum of money given to a business by a bank which needs to be paid back with interest
• Cash Flow


  Amount of cash flowing in and out of a business
• Cash inflow example

  Reciepts
• Cash Outflow example

  Payments
• Drawbacks of Cash Flow

  • Over optimistic about figures
  • Customers may not pay in time
  • Costs can change
• Benefits of Cash Flow

  • Advanced Warnings
  • Spot Payment Issues
  • Ensures Investors
• Break-Even


  Total Revenue and Total Costs are equal, a business neither makes a profit or loss
• Drawbacks of Break-Even

  • Unrealistic Assumptions
  • Doesn't take trends into account
  • Sell more products than expected
• Benefits of Break-Even

  • Find the Margin of Safety
  • Quick and Easy
  • Keep fixed costs low
• Budget


  A financial plan for the future
• Historical Budget


  Uses figure from previous years
• Zero based Budget


  Budget gets set to 0 and is increased with proposals
• Variance Analysis


  Calculating the difference between budget and actual spending
• Favourable Variance analysis


  Actual is better than Budget
• Adverse Variance Analysis 


  Actual is worse than Budget
• Liquid


  Availability of cash to pay back debts
• Liquidation 


  Selling assets to afford to pay back debts
• Liability 


  Being legally responsible for something
• Asset


  Something a business owns
• Fixed or Non-Current Asset


  An asset that has been kept for a long time and isn’t sold easily
• Current Asset


  Assets that can be sold quickly
• Working Capital


  A businesses ability to meet short term debts
• Current Liability 


  Short term debts
• Non-Current Liability 


  Debts a business has for over a year
• Net Assets


  Value of the business
• Ways to improve liability

  • Selling under used assets
  • Increase borrowing
  • Postpone investments
• Job Production


  Production of high quality customised products to meet that customers specific needs