Finance Flashcards Preview

Business Studies > Finance > Flashcards

Flashcards in Finance Deck (21)
Loading flashcards...
1

How do you calculate revenue?

Multiplying the quantity sold by the selling price

2

What are direct costs?

Expenses that can be attributed to making a particular product e.g factory labour and raw materials

3

What are indirect costs?

The general expenses of running the business e.g management salaries, telephone bills and office rent

4

What are fixed costs?

Do not vary with output. They are mostly indirect costs and have to be paid even if the firm produces nothing

5

What are variable costs?

Costs that will increase as the firm expands output. They are most indirect costs

6

What is average cost?

How much each product costs to make

7

How do you work out average cost?

Divide the total cost by output (number of products made). To make a profit the firm must charge a higher price than this

8

How do you work out profit?

Revenue - costs

9

What does a break even chart show?

How much you need to sell

10

What do you need to draw a break even chart?

Fixed costs
Variable costs per unit
Selling price

11

What is drawn on the horizontal and vertical axis?

Horizontal - output
Vertical - cost and revenue

12

What is the order for a break even chart?

Output
Fixed costs
Variable costs
Total costs
Total revenue
Profit

13

How do you find the margin of safety?

The gap between the break even output and the actual output

14

How can you calculate the break even point?

Find the contribution per unit (selling price minus variable cost per unit) then divide the total fixed costs by the contribution per unit

15

What are the 5 reasons firms need finance?

•Start up capital to but assets needed to run business
•To finance their poor initial cash flow
•Need enough cash to meet the day to day running of the business
•Sometimes customers delay payment
•May need to finance to fund expansion

16

What are the 5 main sources of start up finance?

•Grants
•Trade credit
•Overdrafts
•Loans
•Venture capital

17

What is an other word for cash inflow?

Total receipts

18

What is an other word for cash outflow?

Total spending

19

How do you find the net cash flow?

inflow - outflow

20

How do you find your bank balance at the end of your month?

bank balance at start of month - net cash flow

21

How can businesses improve cash flow?

•Give their customers less generous credit terms or insist they pay by cash
•Try to get better credit terms from their suppliers
•Most firms carry a stock of unsold products which they could sell instead of making more