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Business Studies > Terminology > Flashcards

Terminology Flashcards

1
Q

What is sales turnover?

A

Sales turnover is the total amount of revenue generated by a business during the calculation period.

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2
Q

Why is sales turnover useful?

A

It’s useful for tracking sales levels on a trend line through multiple measurement periods, in order to spot meaningful changes in activity levels.

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3
Q

What is the calculation period for sales turnover?

A

The calculation period is usually one year.

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4
Q

What are cost of goods sold?

A

Cost of goods sold are the direct costs attributable to the production of the goods sold by a company.

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5
Q

How do you work out cost of goods sold?

A

beginning inventory + inventory purchases and expenses - ending inventory = cost of sales.

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6
Q

What is opening stock?

A

The amount of goods that are in stock at the beginning of a particular period of time.

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7
Q

What is closing stock?

A

Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period.

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8
Q

List three examples of closing stock.

A

Raw materials, work-in-process, and finished goods inventory.

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9
Q

What is gross profit?

A

Gross profit is the money left once the cost of sales is taken away from the revenues.

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10
Q

What does gross profit tell you?

A

Gross profit tells you how much money a business has made before expenses like salaries and rent are taken away.

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11
Q

Is gross profit positive or negative?

A

Gross profit can be either positive or negative.

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12
Q

What happens if you have positive gross profit?

A

The larger the gross profit, the greater the chance of a positive net profit. However positive gross profit doesn’t always mean that the net profit will be positive.

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13
Q

What happens if you have negative gross profit?

A

If the gross profit is negative, there is nothing left to deduct overheads from. This means there will be no chance of the business making a net profit.

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14
Q

What is cost of sales?

A

Cost of sales is the cost of producing a product. It is the total of all the direct costs like stock, raw materials and labour.

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15
Q

What do financial statements measure?

A

Businesses measure their success with financial statements.

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16
Q

What are financial statements used for?

A

Financial statements record what a business is doing with its money.

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17
Q

Do you have to keep financial statements?

A

Sometimes businesses have to keep financial statements by law.

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18
Q

List two types of financial statements

A
  • An income statement (also known as profit and loss account)
  • A statement of financial position (also known as a balance sheet)
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19
Q

What do income statements do?

A

Income statements show how much money a business has made.

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20
Q

What are direct costs?

A

A direct cost is a cost that can be clearly associated with specific activities or products.

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21
Q

What are indirect costs?

A

Costs that are not directly accountable to a cost object. They can be fixed or variable.

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22
Q

List three examples of indirect costs

A

Administration, personnel and security costs.

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23
Q

What are fixed costs?

A

Business costs, such as rent, that are constant whatever the amount of goods produced.

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24
Q

What is the definition of variable costs?

A

A cost that varies with the level of output.

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25
Q

What is the definition of running costs?

A

Amount of money that is regularly spent on things.

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26
Q

List four examples of running costs

A

Salaries, heating, lighting, and rent.

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27
Q

What are start up costs?

A

Non-recurring costs associated with setting up a business.

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28
Q

List three other names for start up costs

A

Start-up expenses, preliminary expenses, or pre-opening expenses.

29
Q

What is the formula for sales revenue?

A

Price x quantity

30
Q

What is the formula for profit?

A

Total revenue - total costs

31
Q

Name 4 types of indirect costs

A 
A particular:
Project
Facility
Function
Product
32
Q

Name 5 types of start-up costs

A 
Accountant's fees
Legal fees
Advertising
Promotional activities
Employee training
33
Q

What is profit?

A

A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.

34
Q

What is the formula for gross profit?

A

Sales (revenue) - cost of sales

35
Q

What is the formula for net profit?

A

Gross profit - expenses

36
Q

How do you calculate net cash flow for each month in a cash flow forecast?

A

Inflow - Outflow

37
Q

What is the definition for variable costs?

A

A cost that varies with the level of output - It’s not set.

38
Q

What is the formula for total costs?

A

Variable Costs + Fixed Costs

39
Q

What is net profit?

A

The actual profit after working expenses not included in the calculation of gross profit have been paid.

40
Q

What is the break even point?

A

Break even point is the point when a business hasn’t made a profit or a loss.

41
Q

List an example of inflow on a cash-flow forecast

A

Sales

42
Q

List an example of outflow on a cash-flow forecast

A

Wages, rent, advertising

43
Q

List two examples of variable costs for a print shop

A

Ink, paper

44
Q

What is the margin of safety?

A

How much output or sales level can fall before a business reaches its break even point.

45
Q

What is the total revenue?

A

The total receipts from sales of a given quantity of goods or services. It is also the total income of a business.

46
Q

What is the formula for total costs?

A

Quantity of goods sold x the price of the goods.

47
Q

What is the definition of total costs?

A

Total cost refers to the total expense incurred in reaching a particular level of output.

48
Q

List two benefits of break even

A

Helps entrepreneur understand the level of risk involved in a start-up.
Focuses entrepreneur on how long it will take before a start-up reaches profitability.

49
Q

List two limitations of break even

A

Most businesses sell more than one product, so break-even for the business becomes harder to calculate.
Sales are unlikely to be the same as output – there may be some build up of stocks or wasted output too.

50
Q

What is a cash-flow forecast?

A

It is a key aspect of financial management of a business, planning its future cash requirements to avoid a crisis of liquidity.

51
Q

What is the definition of inflow?

A

Money received by an organization as a result of its operating activities, investment activities, and financing activities.

52
Q

What is the definition of outflow?

A

Money paid out by an organization as a result of its operating activities, investment activities, and financing activities.

53
Q

What is net cash flow?

A

Net cash flow refers to the difference between a company’s cash inflows and outflows in a given period.

54
Q

What is net cash flow in the strictest sense?

A

In the strictest sense, net cash flow refers to the change in a company’s cash balance as detailed on its cash flow statement.

55
Q

What is the definition of opening balance?

A

The opening balance is the first entry in a firm’s accounts, either when they are first starting up or at the start of a new financial year.

56
Q

What is the definition of closing balance?

A

A closing balance is the amount remaining in an account within your chart of accounts, positive or negative, at the end of an accounting period or year end.

57
Q

Why is cash flow forecasting important?

A

It is important because if a business runs out of cash and is not able to obtain new finance, it will become insolvent.

58
Q

Where can you find the opening balance?

A

The opening balance can be found on the credit or debit side of the ledger, depending on whether or not the firm has a positive or negative balance.

59
Q

List 4 examples of inflow

A

Sale of products
Interest on savings
Sale of assets, such as old machinery
Borrowed money, such as loans

60
Q

Are inflows regular or irregular?

A

Inflows can be regular or irregular.

61
Q

What are regular inflows?

A

Regular inflows are money that a business receives on a regular basis, such as monthly sales or annual interest.

62
Q

When do irregular inflows happen?

A

Irregular inflows, like loans or the sale of assets, don’t happen all the time.

63
Q

List 4 examples of outflow

A

Payments for stock or raw materials
Payment for equipment
Wages and bills
Loan repayments

64
Q

Are cash outflows regular or irregular?

A

Cash outflows can be both regular or irregular

65
Q

Are regular outflows predictable?

A

Regular outflows can be predicted

66
Q

List 4 types of regular outflows

A

Wages
Bills
Loan repayment
Buying stock

67
Q

Are irregular outflows easy to predict?

A

Irregular outflows, like repairs or news equipment, are harder to predict.

68
Q

How can businesses avoid cash flow problems?

A

Businesses should set aside money for irregular outflows when making a cash flow forecast to avoid any cash flow problems

Business Studies (10 decks)

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