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Questions and Answers
What is the primary concern for the garage with respect to cash flow when dealing with the multi-national company?
Which of the following statements best describes the importance of cash in business?
In the petrol station example, how much money does the garage need to cover expenses before revenue is received?
Why is it advisable to avoid financing a multi-national company as demonstrated in the petrol station example?
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Which option is most favorable if an individual has £100,000 to invest for five years based on the provided risk assessment?
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What is one of the primary risks associated with pursuing market leadership in engineering?
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Which of the following is NOT considered an opportunity for engineers in the market?
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How does imitation impact innovation in a business context?
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What is a notable benefit of repositioning existing products?
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Which aspect is considered key to assessing risks in engineering business innovations?
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What does creativity encompass in the context of innovation?
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Which factor is critical to achieving high profitability in engineering markets?
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Which strategy reduces the risk of marketing pitfalls when developing new products?
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What best defines fixed costs?
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Which of the following is an example of a variable cost?
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In the context of the petrol station example, what represents the profitability of the deal with the multinational company?
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What is one potential risk associated with taking on the account with the multinational company?
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How does effective cash flow management benefit a business?
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What is a primary characteristic of fixed income investments?
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Which statement best describes variable costs?
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What factor is crucial for successfully implementing new ideas in a business?
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Study Notes
Innovation Finance
- Cash is crucial for business success
- Businesses can have profitable ideas, strong order books and talent, but still fail without cash
- Lack of cash is a common cause of business failure
Understanding Risks and Rewards
- There are often choices between taking money immediately or in the future
- If investing your own money, consider low-risk options with potential for growth
Innovation & Leadership in the Market
- Opportunities in the market include: brand recognition, improved market position, defining industry standards, early mover advantage, and high profit
- Risks in the market include high initial costs, uncertainty, sustaining leadership, and the need for continuous learning and adaptation
Innovation & Business Perspectives
- Repositioning and creating entirely new products can be high-risk innovations
- Improvement and imitation strategies are considered lower risk
- Imitation can be effective, leveraging existing market knowledge and proven success but may offer less creative advantage
Innovation vs. Invention
- Invention relates to conceiving an idea
- Innovation involves translating an invention or idea into the economy
What is Creativity?
- Creativity is the ability to produce new and valuable ideas
Profit and Loss Structure
- Fixed costs are expenses unrelated to production volume, such as salaries and rent
- Variable costs are expenses directly related to production volume, such as materials
- Profit or loss is calculated by subtracting total costs from total revenue
Innovation Finance
- Managing money, banking, investments, and credit is essential for successful innovation
- Funding is required to implement new ideas
Petrol Station Example
- An independent petrol station is offered a deal to supply diesel to a multinational company, but there's a 90-day payment period.
- The garage is buying diesel at 80p per litre and selling it at 85p per litre.
- Daily demand is 500 litres.
- The multinational company's payment delay means the garage is financing the multinational with £36,000 for 90 days
- This scenario highlights the importance of cash flow management and the potential risks of extended payment terms.
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Description
Explore the critical role of cash in business success and the impact of innovation on market leadership. Learn about the balance of risks and rewards when making financial decisions, as well as strategies for repositioning and imitation. This quiz will enhance your understanding of innovation in finance and leadership.