1.3 Putting a Business Idea into Practice

• Examples of variable costs?


  Factory labour and raw materials
• Examples of fixed costs?


  Rent and insurance
• What is a fixed cost?


  A cost that does not change with the level of production or sales
• What is a variable cost?

  A cost that varies with the level of production or sales
• Three non-financial aims and objectives?


  Independence and control, Personal challenge and Personal satisfaction
• Three financial aims and objectives?


  Revenue, profit and survive
• What is the difference between an aim and an objective?


  Aims are vague and objectives build up to the aim
• How can changes in costs impact break even?


  Affect the break even point
• How can changes in revenue impact break even?


  Affect break even output
• Two reasons why cash is important to a business?

  Buy raw materials and pay employees
• What is the difference between cash inflows and out flows?


  Cash inflows is money going in the business and cash outflows is money going out of the business
• What is the difference between opening and closing balance?

  The opening balance is the businesses balance at the start of the month and the closing balance is the businesses balance at the end of the month
• What is the benefit of an overdraft?


  Lets the business take more money out its bank then it has
• What is a benefit of trade credit?


  1 or 2 months to pay back for certain purchases
• What is a benefit for personal savings?


  Limits the amount of debts
• What is a benefit for venture capital?


  Potential for the business to grow quickly
• What is a benefit for share capital?


  Get money from selling ownership
• What is a benefit for loans?


  Quick and easy to take out
• What is a benefit for retained profit?


  No interest
• What is a benefit for crowd funding?


  Good for making awareness
• What is a drawback for an overdraft?


  High interest rate
• What is a drawback for trade credit?


  End up with a large fee if payed too late
• What is a drawback for personal savings?


  Lose money if the business fails
• What is a drawback for venture capital?


  Share holders expect returns more quickly
• What is a drawback for share capital?


  Loss of ownership of the business
• What is a drawback for loans?


  Repaid with interest
• What is a drawback for retained profit?


  Limited to the amount of profit you make
• What is a drawback of crowd funding?


  Takes a long time to build up money
• Why are aims and the objectives different between businesses?


  Some businesses might be larger than others and the could operate in different parts of the market