11. Business Skills Flashcards
Define cost
“How much it cost you to produce/manufacture”
Define price
“How much you are selling the product for”
Define value
“How much the customer is prepared to pay for it”
Customers are buying the (________) _______ of the products, not the products themselves.
(Perceived) benefits
What 3 things affect the cost/price/value of an item?
- Buyers criteria
- Sellers criteria
- Product criteria
Define accountancy
The communication of financial information about a business to shareholders and managers. This generally takes the form of financial statements.
Define asset
Assets are economic resources owned or controlled by the business which are capable of producing value (or cash).
Define liability
Liabilities are funds (including borrowings), services or products owed by a business at a specified date.
Define capital & reserves (or owner’s equity)
Funds put into the business by the owners or shareholders and retained on their behalf.
Define gross profit
Sales revenue (and other income) - cost of making the product before deducting overheads, payroll, taxation and other costs for the period.
Define net profit
Gross profit - all costs (e.g. manufacture/sales, operating costs, taxes, etc.). I.e. after subtracting all costs, expenses and losses for the period.
What is the purpose of a profit/loss statement?
To show the performance of business over a given time period.
The profit/loss = total income - total expenditure
What is a balance sheet?
A summary of the financial balances of a business on a specific date, such as at the end of the financial year. It typically includes a list of the business assets, liabilities and ownership equity.
What is a cash flow forecast?
A description of the short-term cash requirements of a business to ensure the future availability of a suitable quantity of liquid cash.
Give the equation for available liquid cash
Liquid (available) cash = cash in the bank + short-term investments - short-term debts (e.g. bills, payroll)
