Cheatography
https://cheatography.com
gcse business studies
year 10
uk
This is a draft cheat sheet. It is a work in progress and is not finished yet.
Sources of finance
}There are many sources of finance. Finance can be used to: buy stock/products, advertising, create websites, taxes, wages, rent, buy machinery |
New share issue -shares represent ownership of a company |
Bank Loan - a set amount of money borrowed from the bank, normally for a specific purpose to be paid back over a period of time |
Hire purchase - spreading the cost of an asset over a period of time |
Examples of internal sources of finance: family & friends, retained profits, sales of assets |
-shareholders will receive a dividend (a share of the profits) and be given a voting right (one voter per share) |
-interest has to be paid on the amount borrowed eg. 5years with a fixed interest rate 6% of the initial sum yearly |
-the asset is received by the business immediately but paid for in regular instalments |
Examples of external sources of finance: new shares, bank loans, mortgages, overdraft, hire purchase government grants or trade credits |
-the amount of dividend payable will vary year on year and depends on: profit levels and company objectives |
-banks may require security on the loan, known as collateral. This can be an asset of the business owner or the company e.g. house, factory |
- after all payments have been made the asset belongs to the business |
Trade credit - when a customer is allowed to purchase goods or services and pay the supplier at a later scheduled date |
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Mortgage - a type of long term loan secured against an asset, normally a building |
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Cash Flow
If cash outflow is higher than cash inflow over a period time then cash in hand will decrease. At some point it may run out. |
Cash Flow Statements- a record of all the cash flowing into and out of the business. It is normally produced monthly but can be any time frame e.g. weekly |
Cash flow forecast - the process of predicting future cash inflows and outflows. This allows a business to identify any potential negative closing balances in advance and therefore take action: speed-up or increase cash inflows, slow down or reduce cash outflows, arrange an overdraft |
Cash Flow problems - when a business is spending more money than one is currently earning; not having money. |
net cash flow - the difference between total cash in and cash out |
Opening balance - cash available at the start of the month |
-can monitor actual cash flow against predicted |
-if a business does have a cash flow problem this can be serious and they may need to take corrective action |
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Closing balance - cash available at the end of the month |
-can help set targets for future years |
-businesses do fail as a result of cash flow problems so it is important to find a solution |
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-allows a business to identify positive closing balances: if too high can be seen as being too careful |
- a solution to improve cash flow is to strategically sell products |
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