Financial Terms

Question 1

Fixed cost

Answer 1

Something that stays the same as output changes for example rent

Question 2

Variable costs

Answer 2

Something that changes as output changes

Question 3

Equation for Total Variable Costs (TVC)

Answer 3

(VCPU X output)

Question 4

Revenue/turnover

Answer 4

Income made from sales

Question 5

Formula for revenue

Answer 5

Selling price per unit x output

Question 6

Profit

Answer 6

Income that’s left after all costs have been taken away

Question 7

Equation for profit

Answer 7

TR-TC

Question 8

Why is break even useful

Answer 8

For a business to know when they are making a profit

Know if SOF is needed to help

To see if idea is viable

Question 9

What is the margin of safety

Answer 9

The output where the business is earning a profit

Question 10

What is the calculation for the margin of safety

Answer 10

Current output - break even output

Question 11

Calculation for total revenue

Answer 11

Sppu x output

Question 12

Total cost calculation

Answer 12

TFC + TVC

Question 13

Average rate of return (ARR)

Answer 13

Average annual profit
_______________________ X100

Initial investment

Question 14

Average Annual Profit

Answer 14

TR - TC
_________

no. of years