Knowledge Test 14 Dec Flashcards
Revenue
The value of goods and services sold
Fixed costs
They are not immediately affected by a change in the number of products sold (e.g. rent & rates, salaries, insurance, advertising, electricity & gas)
Variable Cost
They are immediately affected by a change in the number of products sold (e.g. purchases of goods or materials, packaging, overtime & bonuses)
Total Cost formula
Fixed Cost + Variable Cost
Profit formula
Revenue - Total Cost
Break-even point
The level of sales where revenue is exactly equal to total costs.
Cash flow
Cash received by a business (inflows) and cash paid by a business (outflows). It mainly refers to money received and paid through the bank account
Revenue formula
Selling price x Number of units sold
Variable costs formula
VC per unit x Number of units sold
Total Cost formula
Variable costs + Fixed costs
Profit or Loss formula
Revenue – Total costs
Break-even point (in units)
Fixed costs ÷ (Selling price – Variable cost per unit)
Margin of safety
Actual level of units sold - break even point
Net cash flow
Inflows (cash received) – Outflows (cash spent)
Net cash flow is not the same as profit
Income Statement
It shows revenue, cost of sales, and expenses to calculate profit
Revenue
The value of goods and services sold
Cost of sales
The costs to the business of buying or making the goods or services that it has provided. These are the variable costs of the business.
Gross Profit
Revenue- Cost of sales
What are expenses?
Fixed costs of the business
Profit
Gross profit - expenses
Statement of Financial Position
This summarises the assets and liabilities of a business, as well as its capital or equity
Asset
Assets are owned by a business. They may be non-current assets or current assets
Non-current assets
They are owned and used for over a year: land and buildings, machinery, equipment, vehicles, furniture
Current assets
They include inventory (stock), trade receivables (amounts owed by credit customers) and bank and cash balances
