Unit 3 Flashcards
(41 cards)
AO4 - What is total revenue?
The income received from the sale of a good or service
* Total revenue = price x quantity sold (P x Q)
Total revenue = price x quantity sold (P x Q)
What are revenue streams?
The income a business gets from different business activities
Common streams include selling goods and services, advertisement, merch, transaction fees, and sponsorship.
What is the formula for profit?
Revenue - total costs = profit
What are fixed costs? and give examples
Costs that do not vary with output in the short run
Examples: Rent, property tax, interest on bank loan
Examples include rent, property tax, and interest on bank loans.
What are variable costs? and give examples
Costs that increase as output increases
Examples: Raw materials, packaging, delivery, commission
Examples include raw materials, packaging, delivery, and commission.
What are direct costs? and give examples
Costs that can be clearly identified with the production of each unit of production
Examples: cost of meat in hamburgers, cost of business teacher in business education
Example: Cost of meat in hamburgers.
What are indirect/overhead costs? and give examples
Costs that cannot be clearly identified with each unit of production.
Costs that don’t contribute to production but keep the company going
Ex. Cost of cleaning a school of business (cannot be attributed to a single class)
Ex. Promotional expenditure in a supermarket
Ex. CEO salary
Examples include cleaning costs or promotional expenditure.
What is a cash flow forecast?
A statement that shows the expected cash a business expects to receive and pay out over a period of time.
What are cash inflows?
Sales revenue, owner’s capital, loans, sale of fixed assets
What are cash outflows?
Rent, wages, purchase of inputs and materials, utility payments
What is net cash flow?
Net cash flow = Total Inflows – Total Outflows
What is the main difference between profit and cash flow?
The main difference is timing. Cash might be collected from customers later
Profit is calculated as the revenue and costs incurred during a period of time irrespective of when the payments are madeCash flow is the actual cash inflows and outflows during a period of time
What are the reasons for a profitable business to have cash flow problems.
They have to pay suppliers on time but give trade credit to customers
Expanding too quickly
What are causes of cash flow problems?
Unprofitable business
Giving too much trade credit
Spending too much on expansion
Having too much stock
Seasonal demand problems
What are strategies for dealing with cash flow problems?
Improving cash inflows and reducing cash outflows
Examples include taking a bank loan or finding cheaper suppliers.
What is working capital?
Funds available for the day-to-day running of the business.
What is liquidity?
How quickly assets can be turned into cash.
What is marketing planning ?
Identifying marketing goals and strategies to achieve them.
What is a mass market?
When a business aims to sell a product to all consumers in the market.
What is a niche market?
When a business focuses on a specific and well-defined segment of the market.
What are the pros of mass marketing?
More potential customers
Higher sales
Lower costs due to economies of scale.
What are the pros of niche marketing?
Less competition
Can charge higher prices for specialized products
Can specialize and focus on your target consumers
Product is designed for its consumers so brand loyalty.
What is product differentiation?
Ways in which a business’ products are different from the competition.
What is USP ?
Unique Selling Point: An aspect of a business that makes them appear unique and different to the comptetition the consumers eyes
E.g. The cheapest, the first/original , the well-known slogan
