BS Section 6 (2nd half)

Descrição

Year 11 Business Studies FlashCards sobre BS Section 6 (2nd half), criado por Humza Mahmood em 28-03-2017.
Humza Mahmood
FlashCards por Humza Mahmood, atualizado more than 1 year ago
Humza Mahmood
Criado por Humza Mahmood mais de 7 anos atrás
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Resumo de Recurso

Questão Responda
Why would SOA want to buy additionalo stock? Demand for products during this time will increase This will also avoid situations of stockout which can result in lost sales
Why may there not be additional demand for SOA's products? - 22 other specialist retailers will be present - They can sell their products at cheaper prices
Why may customers still buy from SOA? Price is not the only factor a customer will take into account. Quality of SOA's outdoor pursuits gear may be greater so people may be willing to pay a higher price.
Why is there a problem in how SOA will fund the buying of additional stock? Finance should come from additional sales but there will be a period of cash shortfall as the money from sales take some time to come through.
Give two examples of short-term sources of finance to fill the gap. Trade credit and overdraft.
Give a description of trade credit. Securing an interest free period in which to pay for goods / services received. The typical credit period is between 30 to 70 days.
Give a description of an overdraft. Arrangements between a firm and its bank / building society to withdraw more money from its account than that deposited in it, up to an agreed limit.
What are the advantages and disadvantages of 'trade credit'? ADV: It is interest free DIS: you may not be able to receive a discount for prompt payment
What are the advantages of an 'overdraft'? ADV: It is simple quick and easy to arrange ADV: It is flexible and convenient ADV: It may be a good short-term source of finance as interest is charged daily
What are the disadvantages of an 'overdraft'? DIS: Costs increase because of interest payment DIS: Expensive if used regularly and for large payments DIS: Overdraft facility can be withdrawn without notice.
What are the advantages of buying additional stock? SOA can access discounts for buying in a larger quantity (economies of scale) This will allow SOA a greater profit margin if sales also increase.
What is the first of the five costs associated with holding stock? 1. Cost of storage - e.g. purchase/ rent storage capacity, labour (security), Insurance (against fire)
What is the second of the five costs associated with holding stock? 2. Cost of finance - temporary source of finance may have to be used, e.g. bank loan
What is the third of the five costs associated with holding stock? 3. Theft, damage etc. - if employees know there is a lot of additional stock, they may take less care when handling items
What is the fourth of the five costs associated with holding stock? 4. If additional stock is not sold, it may become obsolete, outdated and unfashionable
What is the fifth of the five costs associated with holding stock? 5. Opportunity cost - money tied up in stock cannot be released until stock is paid for The money used to but this additional stock could have been used to buy something else

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