Finance Flashcards
(17 cards)
Revenue
Money from sales
Costs
Expenses incurred by the business
Fixed costs
Costs that do not change with output (e.g., rent)
Variable costs
Costs that change with output (e.g., raw materials)
Total costs
Fixed costs + Variable costs
Break-even
The level of sales where total revenue equals total costs
Break-even formula
Fixed costs ÷ (Selling price – Variable cost per unit)
Margin of safety
The difference between actual sales and break-even sales
Cash flow
Money flowing in and out of a business
Cash inflow
Money coming in
Cash outflow
Money going out
Cash flow forecast
Predicting future cash inflows and outflows
Net cash flow
Cash inflows – Cash outflows
Cash flow forecast
Predicting future cash inflows and outflows
Sources of finance
Where businesses get money from (e.g., loan, overdraft, retained profit, share capital)
Overdraft
Borrowing from a bank by going into negative balance
Trade credit
Buying now, paying later
