1.6 Revenue, Costs, Profits and Cash Flashcards Preview

EDEXCEL Economics B Paper 1 > 1.6 Revenue, Costs, Profits and Cash > Flashcards

Flashcards in 1.6 Revenue, Costs, Profits and Cash Deck (36)
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1
Q

What’s the formula for Sales Revenue?

A

Price x Quantity

2
Q

What’s the formula for Total Costs?

A

Fixed Costs + Variable Costs

3
Q

What’s the formula for Profit?

A

Total Revenue - Total Costs

4
Q

Define Variable Costs

A

Costs that change with output

5
Q

Define Fixed Costs

A

Costs that stay the same in relation to output

6
Q

What’s the formula for Average Costs?

A

Output

7
Q

What’s the formula for Percentage Change?

A
      Old Value
8
Q

Define Break-Even

A

The point at which there is no profit and no loss

9
Q

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

A
Contribution
10
Q

Define contribution

A

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

11
Q

What’s the formula for contribution?

A

Selling Price - Variable Costs

12
Q

Give 2 limitations of Break-Even analysis

A
  • They are only predictions and fixed costs may change

- External factors may force a reduction in price

13
Q

Define Margin of Safety

A

The volume by which sales are above the breakeven point

14
Q

What is the formula for the Margin of Safety?

A

Volume physically able to be sold - Break Even Point

15
Q

What’s Gross Profit?

A

Profit, not taking fixed costs into account

16
Q

What’s the formula for Gross Profit?

A

Sales Revenue - Variable Costs

17
Q

What’s Operating Profit?

A

Profit, taking all costs into account

18
Q

What’s the formula for Operating Profit?

A

Sales Revenue - Total Costs

19
Q

What’s the formula for Net Profit?

A

Operating Profit - Interest and Taxes

20
Q

What’s the formula for Profit Margin?

A

Profit
————- (x100%)
Turnover

21
Q

What’s the formula for Gross Profit Margin?

A

Gross Profit
———————- (x100%)
Sales Revenue

22
Q

What is the Operating Profit Margin?

A

A measure of how efficiently resources are being used

23
Q

What’s the formula for Operating Profit Margin?

A

Operating Profit
———————— (x100%)
Sales Revenue

24
Q

What’s the formula for Net Profit Margin?

A

Net Profit
———————- (x100%)
Sales Revenue

25
Q

What does the Net Profit Margin tell you?

A

A firm’s financial Performance

26
Q

What is the Statement of Comprehensive Income?

A

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

27
Q

What is the downside of advertising? (2)

A
  • Costly

- May not work

28
Q

What is the added advantage of Customer Loyalty Rewards?

A

Allows you to see purchasing patterns

29
Q

Give 2 disadvantages of cutting staff

A
  • Worsens customer service

- Lowers staff morale

30
Q

Give as many ways as possible of lowering costs

A
  • Cut staff
  • Cut wages
  • Move location
  • Change supplier
31
Q

Give as many ways as possible of increasing revenue

A
  • Change price
  • Advertising
  • Customer loyalty rewards
  • Expansion
32
Q

Define cash outflow

A

The amount of money coming out of a business

33
Q

Define net cash outflow

A

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

34
Q

What’s the formula for Net Cash Flow?

A

Cash Inflow - Cash Outflow

35
Q

Give the main 2 advantages of Cash Flow Forecasts

A
  • To show potential investors that they are a financially viable investment
  • To predict necessary stock levels
36
Q

Give 2 evaluation points of using Cash Flow Forecasts

A
  • Is a prediction and can be inaccurate

- Doesn’t take unexpected factors into account