BUSINESS A-LEVEL - THEME 2

Key terms for theme two of business a-level course

Economic Variables

Features of an economy which have an affect on business and consumers (e.g unemployment, inflation and exchange rates)

Internal Finance

The raising of finance/capital from within the business. (E.g Personal savings, retained profit, selling of shares)

Personal savings

Also called owners capital. A source of internal finance which is provided by the business’s owner

Retained profit

Profit kept overtime which is reinvested into the business

Sale of Assets

A type of internal finance involving the selling of assets which belong to a business

Bank Loan

An external method of gaining finance where money is borrowed from a bank which will be paid back with interest

Business angels

Individuals who invest into a business in exchange for a stake in shares

Crow funding

An external source of finance where a large number of individuals provide funding for a business or it’s project. Usually in return for shares, free products or discounts

External finance

Money raised from outside business

Grant

A sum of money given by a government or other organisation. It doesn’t need to be repaid or have interest charged.

Leasing

A contract which acquires the use of resources such as property or equipment

Loan

An external source/method where money is borrowed, it is usually repayable after a fixed term of 12+ months

Overdraft

When a business has a negative balance in their bank account because the amount withdrawn is greater than their current balance

Peer-to-peer funding

When a person lends money to other individuals or business via online transactions

Trade credit

When a firm receives stock/inventory/raw material from a supplier, which doesn’t have to be paid until later

Share capital

The finance raised through a business issuing/selling shares

Venture Capital

An external source of finance where shares are sold to a small number of investors in return for capital interjection into the company

Liability

The obligations/responsibilities/debts which fall upon the business and its owners

Limited liability 

The obligation of a shareholder/investor for their debts of a business is limited to the value of their investment

Unlimited liability

The obligation of a business owner to cover ALL debts of the business

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 cash into a business

Cash outflow

The flow of cash out of a business

Cashflow Forecast

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

Closing Balance

Cash left in the account at the end of the month.

Net Cashflow

The difference between cash flowing in and out of a business over a period of time

Opening Balance 

Cash in bank at the start of the month

Net cashflow (formula)

Total Cash Inflows - Total cash outflows

Closing Balance (formula)

Net-Cashflow + Opening Balance

Consumer Trends

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

Economic Uncertainty

When firms/consumers are unable to predict their future sales/income and costs

Sales Forecast

A prediction of the expected level of sales volume/revenue for a business for a future period

Average Cost

The cost of producing one unit

Average Cost (Formula)

Total costs/Output

Fixed costs

Costs that do not changes when output/sales changes

Revenue

The amount of income for a business generated from it’s sales.

Revenue (Formula)

Selling price x Quantity sold

Sales revenue

Price multiplied by quantity sold

Total costs

Total fixed costs + Total variable costs

Variable costs

Costs that vary according to the level of output