3rd Test Revision Flashcards
(26 cards)
What are aims and objectives
A business aim is the overall target but the objectives are the steps a business takes to meet the needs
Name non financial aims and objectives
Social, personal satisfaction, challenge, control and independence
What is profit
Any money left after all costs have been taken away from revenue as a business brings in revenue not profit
What is break even
The point when revenue and total costs are the same so the business doesn’t make a profit or loss
How do you calculate break even
Break-even = fixed costs ÷ (selling price − variable costs)
What is the margin of safety
The amount of sales that can fall before the break even point is reached and the business makes no profit
How do you calculate the margin of safety
Margin of safety = actual sales - break even sales
How does an increase in revenue affect a business
The profits increase which allows the business to increase its margin of safety
What are main cash payments a business makes
Payments to suppliers, payments to employees and overheads
What is cash flow
The movement of money in and out of a business over a period of time
Define cash inflows
All the money coming into a business
Define cash outflows
All of the money going out of the business to pay for its costs
What is the calculation for net cash flow
Cash inflow - cash outflow
What is the calculation for closing balance
Net cash flow + opening balance
How can a business improve its cash flow
By using an overdraft
What is trade credit
A source of finance allowing a business to obtain raw materials and stock but pay at a later date
What are the 6 methods of long term finance
Personal savings, venture capital, share capital, bank loan, retained profit and crowdfunding
What is venture capital
Money invested by and individual or group willing to take a risk in funding their business in exchange for a share of profits
What is share capital
Share capital is money raised by shareholders through the sale of ordinary shares
What is the meaning of retained profit
Profit reinvested in the business
Name a disadvantage of an overdraft
High interest rates
Name the 3 methods of short term finance
Hire purchases, trade credit and overdraft
What 3 main factors affect a businesses objectives
Business size, competition, type of business
What type of cost are raw materials
Variable costs
