Putting a business idea into practice OCR

Business Aim

Overall target or goal of a business.

Business Objective

Steps to achieve business aims.

Business Survival

Keeping the business operational over time.

Profit

Money remaining after costs are deducted.

Sales

Amount of product or service sold.

Market Share

Percentage of market occupied by a business.

Financial Security

Ability to cover costs and sustain operations.

Social Objectives

Ethical goals or addressing social needs.

Personal Satisfaction

Entrepreneur's fulfillment from business success.

Challenge

Entrepreneur's desire for personal growth through business.

Market Share

The proportion of sales in a market that are taken by one business.

Fixed Costs

Do not change, no matter how many products or services a business sells. Example: Costs such as insurance, rent, tax and salaries.

Variable costs

Change depending on how many products or services a business sells. This includes costs such as electricity bills and raw materials.

Income Stream

The source of regular income that a business receives.

Viable

Capable of working or succeeding.

Credit

The amount of money that a financial institution or supplier will allow a business to use,which it must pay back in the future at and agreed time.

Overheads

Fixed costs that come from running an office, shop or factory, which are not affected by the number of specific products or services that are sold.

Insolvent

A business that is unable to pay its debts and/or owes more money than it is owed.

Opening Balance

The amount of money in the business's bank account at the start of any period.

Closing Balance

The amount of money in a business at the end of the month.

Credit Limit

The maximum amount of credit that a business has with a financial institution or supplier.

Credit Period

The maximum amount of time that a business can take to pay what is owed for a specific month.

Long Term Sources of Finance

Designed to be paid back over a much longer period of time than a short-term source of finance.

Security

When the lender asks the borrower to put up an asset, such as a house, or a valuable item owned by the business.

Asset

Any item of value that a business owns, such as its machinery or premises.

Guarantor

A named person who guarantees to pay the repayments on a loan should the person who has taken out the loan not be able to make the payments.

Control

Entrepreneur's power over business decisions.

Independence

Running a business without external control.

Break-even Point

Where revenue equals total costs.

Break-even Formula

Break-even = fixed costs ÷ (selling price − variable costs).

Margin of Safety

Sales amount above break-even point.

Margin of Safety Formula

Margin of safety = actual sales − break-even sales.

Revenue Increase

Positive growth in business income.

Revenue Decrease

Negative impact on business income.

Increasing Costs

Negative effect on business profitability.

Decreasing Costs

Positive effect if quality remains unchanged.

Cash Definition

Physical money and bank account funds.

Cash Management

Essential for paying business bills.

Cash Flow Problems

Issues due to late customer payments.

Credit Terms

Agreements to delay payments to suppliers.

Positive Cash Flow

Essential for reducing failure risk.

Cash Flow Forecast

Planning tool for future cash movements.

Short-term Finance

Covers cash flow fluctuations.

Overdraft Features

Variable rates and repayment flexibility.

Trade Credit

Delayed payment agreement with suppliers.

Personal Savings

Entrepreneur's own money without interest.

Venture Capital

Investment for profit shares and influence.

Share Capital

Funds raised by selling business shares.

Bank Loan

Borrowed funds with fixed repayment terms.

Retained Profit

Reinvestment of business earnings for growth.

Crowdfunding

Funding from many small investors online.