unit 2- finance Flashcards
(27 cards)
What are start up costs?
items a business needs to buy before the business opens and starts making income.
What are operating/ running costs?
items a business needs to buy to keep the business up and running.
What are fixed/ indirect costs?
Costs that stay the same no matter how many products are made or sold. These are not directly linked to what the business sells.
What are variable/ direct costs?
Costs that are directly linked to what the business sells.
What is breakeven?
The point where total costs and total revenue are the same. No profit or loss is made at this point.
What is the margin of safety?
The section between the breakeven point and your actual sales.
What is net cash flow?
The difference between inflow and outflow.
What is opening balance?
The amount of money a business starts the month with.
What is closing balance?
The amount of money a business ends the month with.
What is an income statement?
It shows how a business has performed financially over a period of time.
What is gross profit?
The difference between revenue and cost of sales.
What is net profit?
The difference between gross profit and expenses.
What is an asset?
Everything a business owns.
What is a liability?
Money a business owes to others.
What is capital?
The money invested in a business by shareholders.
How can you improve gross profit?
- Increase revenue
- Decrease cost of sales
How can you improve net profit?
- Increase gross profit
- Decrease expenses.
What is the formula for total cost?
Fixed cost + Variable cost
What are the 2 formulas for revenue?
Selling price x quantity sold
OR
Profit + Total cost
What is the breakeven formula ?
Fixed cost / SP-VC
What is the formula for gross profit?
Revenue- cost of sales
What is the formula for net profit?
gross profit - expenses
what is the formula for gross profit margin?
[Gross profit/ Revenue] x 100
