1.3 Business Flashcards
Aims:
a general statement of where you’re
heading, for example ‘to get to university’.
Market share:
the percentage of a market held
by one company or brand.
Objectives:
a clear, measurable goal, so
success or failure is clear to see.
SMART objectives:
targets that are specific,
measurable, achievable, realistic and time-bound.
Survival:
keeping the business going, which
ultimately depends on determination and cash.
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, for example six
per cent per year
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.
Sales revenue=
price × quantity sold
Total costs =
variable costs + fixed costs
Profit = total revenue – total costs
total revenue – total costs
Break-even chart:
a graph showing a company’s
revenue and total costs at all possible levels of
output.
Break-even:
the level of sales at which total
costs are equal to total revenue. At this point
the business is making neither a profi t nor a
loss.
Margin of safety:
the amount by which demand
can fall before the business starts making losses.
Break-even output =
price – variable costs per unit
Margin of safety =
sales – break-even output
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
Closing balance:
the amount of cash left in the
bank at the end of the month.
Negative cash flow:
when cash outflows are
greater than cash inflows.
Net cash flow:
cash in minus cash out over the
course of a month.
Opening balance:
the amount of cash in the
bank at the start of the month.
Crowdfunding:
raising capital online from
many small investors (but not through the stock
market).
Dividends:
payments made to shareholders
from the company’s yearly profits. The
directors of the company decide how large a
dividend payment to make; in a bad year they
can decide on zero.
Retained profit:
profit kept within the business
(not paid out in dividends); this is the best
source of finance for expansion.
Share capital:
raising finance by selling partownership in the business. Shareholders
have the right to question the directors and to
receive part of the yearly profits.
Trade credit:
when a supplier provides
goods but is willing to wait to be paid – for
perhaps up to three months. This helps with
cash fl ow.
Venture capital:
a combination of share capital
and loan capital, provided by an investor willing
to take a chance on the success of a small to
medium-sized business.
