Business 1.3: Putting a Business Idea into Practice Flashcards
(18 cards)
What are business aims and objectives?
Aims are long term goals a business sets for itself and objectives are shorter goals that help reach its objective
What may some financial aims be?
Survival, profit, sales, market share, financial security
What may some non-financial aims be?
Social objectives, personal satisfaction, challenge, independence and control.
What is the formula for revenue?
Revenue = Price x Units sold
What is the formula for total costs?
Total costs = Fixed costs + Variable costs
What is the formula for profit and loss?
Profit/Loss = Revenue - Total costs
What is the formula for interest?
Interest = (Total repayment - Borrowed amount) / Borrowed amount x 100
What is the formula for break-even level of output?
Break-even output = Fixed cost/ Price - Variable costs
What is the formula for margin of safety?
Margin of safety = Actual sales - Break-even sales
What are some examples of why cash is important for a business.
To pay suppliers, overheads and employees and to prevent business failure (insolvency)
What is the difference between cash and profit
Cash flow is the money that flows in and out of your business throughout a given period, profit is whatever remains from your revenue after costs are deducted
What is cash inflows?
Money coming into the business
What is cash outflows?
Money going out of the business
What is the formula for net cash flow?
Net cash flow = Cash inflows - Cash outflows
What is the opening balance?
The previous period’s closing balance
What is the formula for closing balance?
Closing balance = Opening + Net cash flow
What are some short term sources of finance?
Overdraft and trade credit
What are some long term sources of finance?
Personal savings, venture capital,
share capital, loans, retained profit and crowd funding
