1.3 putting a business idea into practice Flashcards
financial business objectives
survival, profit, sales, market share and financial security
non financial business objectives
social concerns, personal satisfaction, control, challenge and independence
fixed costs
stays the same
e.g.- rent, tax and salaries
variable costs
changes depending on how many products or services a business sells
e.g. - electricity bills and raw materials
profit
amount of revenue left over once costs have been deducted
profit equation
price x quantity
gross profit equation
sales revenue - cost of sales
net profit equation
gross profit - other operating expenses and interests
interest in percent
total repayment -borrowed amount
divide
borrowed amount
times 100
break even point in units
fixed costs
divide
(sales price-variable)
margin of safety
how much sales can fall before the businesses break even point is reached again
margin of safety equation
actual budgeted sales - break even sales
overheads
fixed costs that come from running an office, shop or factory which are not affected by the number of specific products or services that are sold
preventing business failure
- arranging sensible credit arrangements with suppliers and customers
-limiting the number of customers to which it gives credit
difference between cash and profit
not all cash paid into a business is profit, a portion of cash will need to be paid out to meet the businesses costs. For example the cash that comes in from a sale will need to cover the variable costs and fixed costs, and the amount of money left over is profit
