What’s the formula for Sales Revenue?

Price x Quantity

What’s the formula for Total Costs?

Fixed Costs + Variable Costs

What’s the formula for Profit?

Total Revenue - Total Costs

Define Variable Costs

Costs that change with output

Define Fixed Costs

Costs that stay the same in relation to output

What’s the formula for Average Costs?

Output

What’s the formula for Percentage Change?

Old Value

Define Break-Even

The point at which there is no profit and no loss

What’s the formula for the Break-Even point?

Contribution

Define contribution

The difference between the price of a product and its variable costs

What’s the formula for contribution?

Selling Price - Variable Costs

Give 2 limitations of Break-Even analysis

- They are only predictions and fixed costs may change

- External factors may force a reduction in price

Define Margin of Safety

The volume by which sales are above the breakeven point

What is the formula for the Margin of Safety?

Volume physically able to be sold - Break Even Point

What’s Gross Profit?

Profit, not taking fixed costs into account

What’s the formula for Gross Profit?

Sales Revenue - Variable Costs

What’s Operating Profit?

Profit, taking all costs into account

What’s the formula for Operating Profit?

Sales Revenue - Total Costs

What’s the formula for Net Profit?

Operating Profit - Interest and Taxes

What’s the formula for Profit Margin?

Profit

————- (x100%)

Turnover

What’s the formula for Gross Profit Margin?

Gross Profit

———————- (x100%)

Sales Revenue

What is the Operating Profit Margin?

A measure of how efficiently resources are being used

What’s the formula for Operating Profit Margin?

Operating Profit

———————— (x100%)

Sales Revenue

What’s the formula for Net Profit Margin?

Net Profit

———————- (x100%)

Sales Revenue

What does the Net Profit Margin tell you?

A firm’s financial Performance

What is the Statement of Comprehensive Income?

Profit and loss accounts where you begin with sales revenue and deduct each cost to arrive at a final measure of either profit or loss

What is the downside of advertising? (2)

- Costly

- May not work

What is the added advantage of Customer Loyalty Rewards?

Allows you to see purchasing patterns

Give 2 disadvantages of cutting staff

- Worsens customer service

- Lowers staff morale

Give as many ways as possible of lowering costs

- Cut staff
- Cut wages
- Move location
- Change supplier

Give as many ways as possible of increasing revenue

- Change price
- Advertising
- Customer loyalty rewards
- Expansion

Define cash outflow

The amount of money coming out of a business

Define net cash outflow

The amount of money coming in and out of a business over a given time

What’s the formula for Net Cash Flow?

Cash Inflow - Cash Outflow

Give the main 2 advantages of Cash Flow Forecasts

- To show potential investors that they are a financially viable investment
- To predict necessary stock levels

Give 2 evaluation points of using Cash Flow Forecasts

- Is a prediction and can be inaccurate

- Doesn’t take unexpected factors into account