Sources of Finance Finance: Cost, Revenue and Profit
- Businesses need finance to: start-up, expand, operate costs, recruit - Ratio Analysis, two businesses may have the same gross profit - Factors affecting b
and market, regardless of the scale of the business and net profit, but one can be mor successful than the other > proximity to labou
Key words:
- Factors that affect the choice of finance are… e.g. £100 is huge for a small business, but insignificant for a - some businesses
Revenue = the money a business makes from selling its goods
- amount needed and why it is required large business suppliers
and services
- legal status and circumstances of a business - How to improve Gross Profit Margin (and Net Profit - necessary for som
Profit = money that is left over once all the expenses incurred
- Pros and cons of the different way a business can raise finance: Margin) materials
in running the business have been paid
> ext) Loan : money borrowed for bank with a repayment % plan > Increase sales revenue - environmental an
Cash = all the money that comes into the business
+ money is guaranteed / repayments in installations / no shares sold - lower price, so buyers increase so the business revenue - need to be aroun
Production = turning raw materials into a good / service that
- not flexible / if unable to pay bank takes assets / time consuming increases > government decis
can be sold
> ext) Bank overdraft : business withdraws fund in credit from bank - up price if customers are willing to pay price revenue - governments wil
Automation = using machinery to replace human jobs
+ flexible / short term fix / less paperwork involved increases it can
Robotics = extensions of automation – the use of robotics in
- bank can withdraw at any time / interest % increases over time - increase averages, but this can affect expenses boost income / e
production
> ext) Trade credit : when a business buys first and pays later > Decrease cost of sales - ‘Enterprise zones
Quality control = all or a sample of products are checked at the
+ lets a business to get goods before they pay, improves cash-flow - change / negotiate with current suppliers to lower prices the business can
end of the production process / after a service is completed
- danger of bad reputation if not paid on time / difficult for start-ups - delayer organisational structure / review salaries + built premises
Quality assurance = process that ensures the quality meets the
> ext) New share issue : a business selling shares for finance bonuses > cost and infrastru
requirements of the customers, by organising every part of the
+ more money can be raised / no repayment of capital / no interest - freeze recruitment / move to a cheaper location temporarily - easy to transport
production process to ensure they get it right every time
- loss of control if sell 50%< / need to satisfy shareholders Influences of Business: Ethics and Environment business
Customer service = meeting customer needs before, during and
> ext) Crowdfunding : raising money online with global investors - Ethics are moral guidelines that govern good behaviour – - many things to a
after the sale has taken place
+ cheap investment / good publicity / use of media / can gain skills being ethical is doing what is morally right materials
Consumer law = law that helps customers
- investors want something in return / limited money can be raised - Most common issues are… Procurement = the process of managing the ordering and Operations
> int) Owner’s capital : owner invests personal savings in a business - treatment of workers receipt of goods and services in the business - Face-to-face – whe
+ owners’ commitment / no interest / maximises owners control - treatment of suppliers Suppliers = business / individual that provides goods / services customer to try and
- the amount available might not be enough, still need more finance - treatment of customers to another business - Telesales – buying a
> int) Retained profit : net income not given to shareholders - sourcing of materials Trade off = a balance between two desirable outcomes, where - E-commerce – buyi
+ cheap / no interest / flexible / does not dilute the ownership - marketing decisions both aren’t achievable, either one or the other - How has e-comme
- less growth, no reinvestment / upset shareholders as no dividends - Pros and cons to a business by making ethical decisions… Logistics = management of transportation + storage of goods + easier for a busin
> int) Sale of assets : selling unwanted assets within a business + good reputation, avoids any negative publicity Trade credit = a business-to-business agreement where a + automatic orderi
+ no money needs to be repaid / does not dilute the ownership + can change a premium price for their product customer can purchase goods and paying the supplier later - high costs of inve
- not a long term solution / depreciation of the business’ value + attract employees that are motivated Cost = the spending that occurs to set up (start up costs) and - lack of personal c
Finance: Cash Flow - can increase costs, potential loss of profitability run (running costs) a business - An effective sales p
- It is important to forecast cash flow, because if a business runs out - time consuming, takes time to write / review ethical policies Fixed costs = costs which do not change in relation to output 1) knowledge of th
of cash it will be unable to pay suppliers, overheads and employees - difficulty in ensuring ethical standards are maintained e.g. salaries / rent / insurance 2) engaging with th
and may become insolvent, leading to failure; it also identifies - Environmental considerations and their impact on businesses: Variable costs = costs which change because of changes in 3) speed and efficie
periods of shortages in cash and helps spot problems with payments > Environment – refers to how the activities of businesses and output e.g. raw materials / packaging 4) finalising the dea
- Common problems with cash flow forecasts… consumers impact the natural world Margin of safety = the difference between the actual output 5) choice of conven
- sales are lower than expected > Sustainability – a business being able to meet the needs of its and the break even point 6) good after-sales
- customers don’t pay up on time own without sacrificing the ability of the future generations to Cash flow = the process of cash flowing in and out of the 7) responding to cu
- cost of production is higher than expected be able to meet their needs business - Why should busine
- many costs are not included > Waste disposal – safe disposal of waste generated in the Net cash flow = the difference between cash inflows and cash - to increase sales -
- Possible solutions to cash flow problems… production process; finding alternative uses of waste outflows over a certain period of time - word of mouth pr
- bank overdraft > Pollution – reducing carbon emission; safe practices to limit - more effective wo
- red-scheduling payments the chance of environmental disasters; filters; traffic pollution
> Resource depletion – using up of natural resources Production Processes Op
- reducing cash outflows - Job – involves producing each product individually - Consumer Rights Act (2
- increasing cash inflows Globalisation + quality of the product is high as it has been hand made > Goods and services mu
- finding new sources of finance - Branding is a promotional activity that distinguishes its + price increases because of the time spent on it - of satisfactory quality
- Opening balance is the value of cash at the start of a trading period products form other businesses products - high labour costs as many people are needed described
- Closing balance is the value of cash at the end of a trading period - International branding = a product is recognised worldwide - costs more is customers want varied products > Rights cannot be used
- Businesses need finance to: start-up, expand, operate costs, recruit - Ratio Analysis, two businesses may have the same gross profit - Factors affecting b
and market, regardless of the scale of the business and net profit, but one can be mor successful than the other > proximity to labou
Key words:
- Factors that affect the choice of finance are… e.g. £100 is huge for a small business, but insignificant for a - some businesses
Revenue = the money a business makes from selling its goods
- amount needed and why it is required large business suppliers
and services
- legal status and circumstances of a business - How to improve Gross Profit Margin (and Net Profit - necessary for som
Profit = money that is left over once all the expenses incurred
- Pros and cons of the different way a business can raise finance: Margin) materials
in running the business have been paid
> ext) Loan : money borrowed for bank with a repayment % plan > Increase sales revenue - environmental an
Cash = all the money that comes into the business
+ money is guaranteed / repayments in installations / no shares sold - lower price, so buyers increase so the business revenue - need to be aroun
Production = turning raw materials into a good / service that
- not flexible / if unable to pay bank takes assets / time consuming increases > government decis
can be sold
> ext) Bank overdraft : business withdraws fund in credit from bank - up price if customers are willing to pay price revenue - governments wil
Automation = using machinery to replace human jobs
+ flexible / short term fix / less paperwork involved increases it can
Robotics = extensions of automation – the use of robotics in
- bank can withdraw at any time / interest % increases over time - increase averages, but this can affect expenses boost income / e
production
> ext) Trade credit : when a business buys first and pays later > Decrease cost of sales - ‘Enterprise zones
Quality control = all or a sample of products are checked at the
+ lets a business to get goods before they pay, improves cash-flow - change / negotiate with current suppliers to lower prices the business can
end of the production process / after a service is completed
- danger of bad reputation if not paid on time / difficult for start-ups - delayer organisational structure / review salaries + built premises
Quality assurance = process that ensures the quality meets the
> ext) New share issue : a business selling shares for finance bonuses > cost and infrastru
requirements of the customers, by organising every part of the
+ more money can be raised / no repayment of capital / no interest - freeze recruitment / move to a cheaper location temporarily - easy to transport
production process to ensure they get it right every time
- loss of control if sell 50%< / need to satisfy shareholders Influences of Business: Ethics and Environment business
Customer service = meeting customer needs before, during and
> ext) Crowdfunding : raising money online with global investors - Ethics are moral guidelines that govern good behaviour – - many things to a
after the sale has taken place
+ cheap investment / good publicity / use of media / can gain skills being ethical is doing what is morally right materials
Consumer law = law that helps customers
- investors want something in return / limited money can be raised - Most common issues are… Procurement = the process of managing the ordering and Operations
> int) Owner’s capital : owner invests personal savings in a business - treatment of workers receipt of goods and services in the business - Face-to-face – whe
+ owners’ commitment / no interest / maximises owners control - treatment of suppliers Suppliers = business / individual that provides goods / services customer to try and
- the amount available might not be enough, still need more finance - treatment of customers to another business - Telesales – buying a
> int) Retained profit : net income not given to shareholders - sourcing of materials Trade off = a balance between two desirable outcomes, where - E-commerce – buyi
+ cheap / no interest / flexible / does not dilute the ownership - marketing decisions both aren’t achievable, either one or the other - How has e-comme
- less growth, no reinvestment / upset shareholders as no dividends - Pros and cons to a business by making ethical decisions… Logistics = management of transportation + storage of goods + easier for a busin
> int) Sale of assets : selling unwanted assets within a business + good reputation, avoids any negative publicity Trade credit = a business-to-business agreement where a + automatic orderi
+ no money needs to be repaid / does not dilute the ownership + can change a premium price for their product customer can purchase goods and paying the supplier later - high costs of inve
- not a long term solution / depreciation of the business’ value + attract employees that are motivated Cost = the spending that occurs to set up (start up costs) and - lack of personal c
Finance: Cash Flow - can increase costs, potential loss of profitability run (running costs) a business - An effective sales p
- It is important to forecast cash flow, because if a business runs out - time consuming, takes time to write / review ethical policies Fixed costs = costs which do not change in relation to output 1) knowledge of th
of cash it will be unable to pay suppliers, overheads and employees - difficulty in ensuring ethical standards are maintained e.g. salaries / rent / insurance 2) engaging with th
and may become insolvent, leading to failure; it also identifies - Environmental considerations and their impact on businesses: Variable costs = costs which change because of changes in 3) speed and efficie
periods of shortages in cash and helps spot problems with payments > Environment – refers to how the activities of businesses and output e.g. raw materials / packaging 4) finalising the dea
- Common problems with cash flow forecasts… consumers impact the natural world Margin of safety = the difference between the actual output 5) choice of conven
- sales are lower than expected > Sustainability – a business being able to meet the needs of its and the break even point 6) good after-sales
- customers don’t pay up on time own without sacrificing the ability of the future generations to Cash flow = the process of cash flowing in and out of the 7) responding to cu
- cost of production is higher than expected be able to meet their needs business - Why should busine
- many costs are not included > Waste disposal – safe disposal of waste generated in the Net cash flow = the difference between cash inflows and cash - to increase sales -
- Possible solutions to cash flow problems… production process; finding alternative uses of waste outflows over a certain period of time - word of mouth pr
- bank overdraft > Pollution – reducing carbon emission; safe practices to limit - more effective wo
- red-scheduling payments the chance of environmental disasters; filters; traffic pollution
> Resource depletion – using up of natural resources Production Processes Op
- reducing cash outflows - Job – involves producing each product individually - Consumer Rights Act (2
- increasing cash inflows Globalisation + quality of the product is high as it has been hand made > Goods and services mu
- finding new sources of finance - Branding is a promotional activity that distinguishes its + price increases because of the time spent on it - of satisfactory quality
- Opening balance is the value of cash at the start of a trading period products form other businesses products - high labour costs as many people are needed described
- Closing balance is the value of cash at the end of a trading period - International branding = a product is recognised worldwide - costs more is customers want varied products > Rights cannot be used
