theme 2 definitions

• Economic variables


  Measures within the economy which have effects on business and consumers e.g. unemployment, inflation and exchange rates
• Internal finance


  The raising of capital/cash from within/inside the business e.g. business/owner's capital, personal savings, retained profit
• Personal savings/owners' capital


  A source of (internal) finance provided by the owner of a business/personal money from the owner
• Retained profit


  Profit is re-invested back into/kept by the business which is not paid as a dividend. It is an internal source of finance
• Sale of assets


  A type of internal finance, involves selling resources that belong to the business
• Bank loan


  An external method of finance/money borrowed from a bank paid back, with interest (over a period of time)
• Business Angels


  Individuals who typically may invest between £10,000 and £100,000 in exchange for a stake in the business
• Crowd funding


  An external source of finance where large numbers of individuals provides funding for a business or project in return for shares/free products/discounts
• External finance


  Money raised from outside the business
• Grant


  A sum of money given by a government or other organisation. It does not need to be repaid and no interest is charged
• Leasing


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


  An external source/method; amount of money borrowed, usually repayable after a fixed term of more than 12 months
• Overdraft


  When a business has a negative balance in their bank account because the amount withdrawn is greater than the current balance
• Peer-to-peer funding


  When a person lends money to other individuals or businesses via online transactions
• Share capital


  The finance raised a business issuing/selling of new shares
• Trade credit


  Where a firm receives stock/inventory/raw materials 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 investor(s) in return for a capital injection into the company
• Liability


  Responsibility for the financial debts of the business
• Limited liability


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


  A 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 provide a strategic look at the business and to attract investors. It contains details such as the product, costs, revenues, cashflow forecasts
• Cash flow


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


  The flow of money into a business
• Cash Outflow


  The flow of money out of a business
• Cash-flow forecasts


  The predicted flow of cash into and out of a business over a period of time
• Closing balance


  Money left in the account at the end of the month. Net cash flow + Opening balance
• Net cashflow


  The difference between the cash flowing in and out of a business over a period of time cash inflows- cash outflows
• Opening balance


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


  Habits or behaviour of those involved in the use of goods and services
• Economic uncertainty


  Where firms/consumers are unable to predict their future sales/incomes
• Sales forecast


  A prediction of the expected level of sales volume/revenue for a business for a future period based on past data
• Average cost


  The cost of producing one unit. Total costs/output
• Fixed costs


  Costs that do not change when output/sales changes
• Revenue


  The amount of income for a business generated from its sales. Selling price x quantity sold
• Sales revenue


  Selling price x sales volume
• Total costs


  Total fixed costs plus total variable costs
• Variable costs


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


  The level of output where the total revenue is equal to the total cost. Fixed costs/Unit contribution
• Unit contribution


  Selling price- variable cost per unit
• Margin of safety


  The difference between the current or planned level of output/sales and the break-even level of output