Business - 1.3.2 - 1.4.4

fixed costs

Costs that do not change with output

Features of a small business (5)

Limited staff, smaller marketing budget, less access to finance, fewer years of trading history, personal relationships with customers

Variable costs

costs that vary directly with the level of output

Total costs

fixed costs + variable costs

Revenue

price x quantity sold

Interest

A charge on loaned money or the return paid on savings

Break even

A point at which revenue equals costs.

Break even level of output (calculation)

fixed costs / price - variable cost per unit

Margin of Safety

difference between the level of output and the break even level of output

Cash

Funds available to a business to pay short-term running costs

Insolvency

Where a business is unable to pay its running costs

Cash inflows/outflows

The flow of money into/out of a business

Cashflow forecast

a table used to calculate the cash position of a business over time

Net cash flow

cash inflows - cash outflows

Opening balance

A business's cash balance carried forward into the next period

Closing balance (equation)

Opening balance + net cash flow

Short term sources of finance

sources of money for business that have to be repaid in under a year

Long term source of finance

sources of money for business that can be repaid over a year

Overdraft

A buffer that allows a business to overspend

trade credit

the practice of buying goods and services now and paying for them later

Personal savings

money that has been saved up by the owners of the business

Venture capital

money that is invested in small firms that have the potential to become very successful for a share of the business

Share capital

Investment into a private limited company by its owners (shareholders)

Loan

Borrowing from a bank to be paid back over an agreed period with interest

Retained profit

Profit which is kept back in the business and used to pay for investment in the business.

Crowdfunding

raising money for a project or venture by obtaining many small amounts of money from many people

Franchise

When one business gives another business permission to trade using its name and products in return for a fee and share of its profits

Franchisee

A person who buys a franchise

Franchisor

A company that develops a product concept and sells others the rights to buy a franchise

Limited liability

financial responsibility of business owners only for what they invested in a business

Partnership

a business that is owned by two or more people

Private limited company (PLC)

A business owned by shareholders with limited liability but whose shares cannot be bought or sold to the general public

Sole trader

A type of unincorporated business that is owned by just one person and who has unlimited liability

Unlimited liability

the responsibility of business owners for all of the debts of the business

E-commerce

Using the internet to carry out business transactions

Labour

Workers or the workforce

Proximity

nearness, how close a business is to its competitors, workers, customers

Digital communication

electronic exchange of information

Marketing mix

a combination of factors that can be controlled by a company to influence consumers to purchase its products.

Price

The amount of money exchanged for a good or service

Product

a good or service that a business is selling

Promotion (of a product)

Communication by marketers that informs, persuades, and reminds potential buyers of a product.

Place

Where the product is sold

SMART objectives

Targets that are specific, measurable, achievable, realistic and time bound.