Business Aims & Cash Flow

These flashcards cover essential concepts related to business aims, cash flow, costs, and break-even analysis, providing a comprehensive review for exam preparation.

What are business aims and objectives?

Business aims are the goals a business wants to achieve, while objectives help attain those aims.

What is a financial aim of a business?

Financial aims may include maximizing profit or ensuring survival by breaking even.

What does it mean to maximize profit?

To maximize profit means ensuring that income from sales is greater than outgoing costs.

What is market share?

Market share is the percentage of a market's total sales earned by a business.

How can a business increase its market share?

A business may invest in marketing activities to attract customers from competitors.

What is a common non-financial aim for businesses?

A common non-financial aim is achieving personal satisfaction from running the business.

What does achieving financial security mean for a business?

Achieving financial security means earning enough revenue to fund the business autonomously.

What are fixed costs?

Fixed costs are expenses that do not change as output levels rise, such as rent or insurance.

What are variable costs?

Variable costs are expenses that increase with output, such as materials and delivery costs.

What is the break-even point?

The break-even point is where total costs equal total revenue, resulting in no profit or loss.

What is margin of safety?

Margin of safety is the extent to which actual or projected sales exceed the break-even point.

What is cash flow?

Cash flow is the inflow and outflow of cash into and out of a business within a given period.

What is net cash flow?

Net cash flow is calculated as cash inflow minus cash outflow.

What indicates a positive net cash flow?

A positive net cash flow occurs when a business's inflows are greater than its outflows.

What indicates a negative net cash flow?

A negative net cash flow occurs when a business's inflows are less than its outflows.

Why is cash flow important for businesses?

Cash flow is crucial for paying debts, suppliers, and employees on time.

What can cause cash flow problems for a business?

Cash flow problems can arise from overestimating sales, overinvestment, and granting excessive credit.

What is a cash flow forecast?

A cash flow forecast predicts how cash will flow in and out of a business over time.

What are some measures to prevent cash flow problems?

Measures include reducing cash outflow and increasing cash inflow, such as securing overdrafts.

How is contribution per unit calculated?

Contribution per unit is calculated as the selling price per unit minus the variable cost per unit.

What is the significance of break-even analysis?

Break-even analysis helps a business understand how many units must be sold to cover costs.

What can lead to customer loyalty?

Improving product design, quality, and customer satisfaction can lead to customer loyalty.

What role does customer satisfaction play in business success?

High customer satisfaction can lead to repeat purchasing and increased sales.

What is a unique selling proposition (USP)?

A USP is a feature that makes a product stand out from its competitors.

How can a business add value to its products?

A business can add value by improving quality, convenience, and customer service.

What external factors can impact a business's cash flow?

Economic downturns and market competition can significantly impact a business's cash flow.

How does overinvestment create cash flow issues?

Overinvestment in fixed assets can leave a business without enough cash for day-to-day expenses.

Why is it important to control costs?

Controlling costs helps prevent excess cash outflow and maintains healthy cash flow.

What can happen if a business gives too much credit?

If too much credit is given, it can strain cash resources and lead to insolvency.

What role does good customer service play in business?

Good customer service enhances customer satisfaction and can result in increased sales and loyalty.

What types of expenses might be considered cash outflows?

Cash outflows can include rent, wages, utilities, and other operational costs.

What might result from inaccurate sales forecasting?

Inaccurate sales forecasting can lead to cash inflow problems and financial difficulties.

What should businesses aim for to promote positive cash flow?

Businesses should aim for timely payments from customers and efficient cash inflow management.

What does 'ensuring timely payment' involve?

It involves setting reasonable payment dates and terms to prevent overdue accounts.

How is break-even output calculated?

Break-even output is calculated by dividing fixed costs by contribution per unit.