Topic 1.3 Flashcards
(20 cards)
What are a business aims and objectives when starting up?
● financial aims and objectives: survival, profit, sales,
market share, financial security
● non-financial aims and objectives: social objectives,
personal satisfaction, challenge, independence
and control
What is the importance of Cash to a business?
● to pay suppliers, overheads and employees
● to prevent business failure (insolvency)
● the difference between cash and profit
What are the short term sources of finance?
overdraft and trade credit
What are the long term sources of finance?
personal savings, venture capital, share capital, loans, retained profit and crowd funding
What is revenue?
price x quality
What is fixed costs?
RENT OR MORTGAGE PAYMENTS
total cost - (variable cost per unit x number of units produced)
What is variable costs?
RAW MATERIALS AND UTILITIES
variable cost per unit x number of units
What is total cost?
total fixed cost + total variable cost
Break even point in units -equation
fixed cost / (sales price - variable cost)
Break even point in revenue -equation
break even point in units x sales price
margin of safety - equation
actual or budgeted - break even sales
interest on loans (%) - equation
total repayment - borrowed amount / borrowed amount X 100
net cash flow- equation
cash inflows - cash outflows in a given period
gross profit - equation
sales revenue - cost of sales
gross profit margin (%) - equation
gross profit / sales revenue X 100
net profit - equation
gross profit - other operating expenses and interest
net profit margin (%) - equation
net profit / sales revenue x 100
average rate of return (%) - equation
average annual profit (total profit / number of years) / cost of investment x 100
closing balance
opening balance + net cash flow
opening balance
closing balance from day before
