1.3 Flashcards
Fixed costs
Costs that don’t vary just because output varies, for example rent.
Interest
The charges made by banks for the cash they have lent to a business.
Profit
The difference between revenue and total costs; if the figure is negative the business is making a loss.
Revenue
The total value of the sales made within a set period of time, such as a month.
Total costs
All the costs for a set period of time, such as a month.
Variable costs
Costs that vary as output varies, such as raw materials.
Break-even
The level of sales at which total costs are equal to total revenue. At this point the business is making neither a profit nor a loss.
Break-even chart
A graph showing a company’s revenue and total costs at all possible levels of output.
Margin of safety
The amount by which demand can fall before the business starts making losses.
Cash
The money the firm holds in notes and coins, and in its bank accounts.
Cash flow
The movement of money into and out of the firm’s bank account.
Insolvency
When a business lacks the cash to pay its debts.
Overdraft
The amount of the agreed overdraft facility that the business uses.
Overdraft facility
An agreed maximum level of overdraft.
Cash flow forecast
Estimating the likely flows of cash over the coming months and, therefore, the overall state of one’s bank balance.
