1.6.1 - 1.6.4 Flashcards
(33 cards)
Sales volume
Physical quantity of products sold
Sales revenue
Sales - Total incoming payments for products sold
Turnover - Price x Quantity sold
Start-up costs
The initial costs a business faces when setting up
Capital spending
Funds used by a company to
Aquire/ upgrade/ maintain
physical assets such as
Property/ buildings/ industrial plants/ technology/ equipment
Investment
When a business buys premises and equipment now that will last over a period of years and produce goods/services which generate sales for the business
Operating costs/
Running costs
Fixed costs:
Costs which do not vary directly with output
e.g. rent/mortgage + insurance + utility bills + salaries
Variable costs:
Costs which vary directly with output
e.g. Labour (wages) + raw materials
Depreciation
The loss in value of goods over time
Law of diminishing returns
In the short run - adding additional units/labour helps but it will reach a maximum output and then delete again
Variable costs
Costs that vary at each payment (e.g. wages)
Costs that change with output
Fixed costs
Costs that don’t change (e.g. rent + materials) in the shirt term
Profit
Sales revenue - total costs
Selling price
The price at which the good/service is sold
Loss
When costs are greater than revenue
Contribution
Selling price in variable costs
Break-even point
When total costs = Total sales revenue
Break-even analysis
A useful tool for determining at what point a company/good/service will be profitable
Margin of safety
Current sales level - break even point
——————————————————— x 100
Current sales level
Margin of safety
Current sales level - break even point
——————————————————— x 100
Current sales level
Margin of safety
Current sales level - break even point
——————————————————— x 100
Current sales level
Barriers to entry
An obstacle stopping an individual/ entity from entering a market
Sunk costs
Start-up costs that cannot be recovered
Barriers to exit
An obstacle stopping an individual/entity leaving a market
Turnover
Amount of money coming into a business through sales
Statement of comprehensive income
Profit and loss accounts
Starts with a figure for sales revenue and deducts each different group of costs to arrive at measures of profit
