1.3 Flashcards
1.3 - Financial aims
- Survival
- Maximise profits
- Maximise sales
- Increase market share
- Achieve financial security.
1.3 - Non-financial aims
- Personal satisfaction
- Personal challenge
- Gaining independence and control.
- Doing what’s right for society.
1.3 - Objectives
On the way to the aim
Measurable steps
Clear targets
1.3 - Factors that affect the aims and objectives of a business
- The size and age of the business.
- Who owns the business.
- The level of competition the business faces.
1.3 - Revenue
Revenue is the income earned by a business.
Revenue = quantity sold x price
1.3 - Costs
Fixed costs don’t vary with output (e.g. rent, insurance and wages).
Variable costs vary with output (e.g. raw materials, and factory labour).
Total variable costs = quantity sold x variable cost per unit
Total costs = variable costs + fixed costs
1.3 - interest
(total repayment - borrowed amount) /
borrowed amount
x 100
1.3 - Profit
Profit = revenue - costs
1.3 - Break even
Just about covering costs: neither loss nor profit.
Break even (units) = fixed costs / (sales price -- variable cost per unit)
Break even (costs) = break even in units x sales price.
Break even point on a graph is where the lines for total costs and total revenue cross.
1.3 - Margin of safety
margin of safety =
actual sales - break even sales
1.3 - Cash flow
Cash is NOT the same as profit.
Cash is the money a company can spend immediately.
A business needs case to pay: employees, supplies and overheads.
Net cash flow = cash inflows - cash outflows.
1.3 - short term sources
Trade credit
Overdrafts
1.3 - long term finance sources
- loans
- personal savings
- share capital
- venture capital
- retained profit
- crowd funding
