1.3 Putting a business Idea into practice Flashcards
what are aims?
Aims are overall goals that a business will want to achieve.
what are objectives?
Objectives are like mini aims which will help the business to achieve its overall aims.
what could be the financial aims of a business?
Survival, maximise profit, increase market share, maximise sales, Achieve financial security.
what could be the non-financial aims of a business?
Accomplishing a personal challenge, achieving personal satisfaction, gaining independence and control and doing what’s right for the society.
How are objectives more specific than aims?
They’re measurable steps on the way to the aim.
what factors could affect the aims and objectives of a business?
The size and age of the business, who owns the business, and the level of competition the business faces.
what is revenue?
Revenue is the income earned by a business.
what is the formula to calculate the revenue?
Revenue = quantity sold x price
what are costs in a business?
Costs are the expenses paid out to run the business.
what are some of the examples of fixed costs?
The rent, insurance, fixed salaries for employees, and advertising.
what are some of the examples for variable costs?
Factory labour, raw materials and running machinery.
what is the formula for the total variable cost?
Total variable cost = quantity sold x variable cost per unit
what is the formula for total costs?
total costs = total variable costs + total fixed costs
what is the formula to calculate interest on loans?
Interest on loans = total repayment - borrowed amount
—————————————————– x 100
borrowed amount
what is the formula to calculate profit?
Profit = Revenue - costs
what does breaking even mean?
Breaking even means covering your costs.
what does break-even analysis allow businesses to do?
Break-even analysis allows firms to find out the minimum amount they need to sell to get by
what is the formula to calculate the break even?
Break-even point in units = fixed cots
—————————————————–
sales price - variable cost (per unit)
what is the second formula to calculate the break-even?
Break-even point for revenue (or costs) = break-even point units x sales price
what is the margin of safety?
The margin of safety for a firm is the gap between the current level of output and the break-even output.
what is the equation to calculate the margin of safety?
The margin of safety = actual sales (or budgeted sales) - break-even analysis.
what will the firm use if it’s trying to forecast its future margin of safety?
margin of safety = actual sales (or budgeted sales) - break-even sales
what will the firms do if it’s trying to forecast their future margin of safety?
the firm will use budgeted sales if it is trying to forecast its future margin of safety. The budgeted sales will be the sales that it expects to make.
why are break-even diagrams useful?
It can be useful for seeing how changes in revenue and costs may affect the break-even output.
why does a business need cash?
A business needs cash to pay its employees, its suppliers, overheads, rent and lighting
what is a cash flow?
Cash flow is the flow of all money into and out of the business.
what is the formula to calculate the net cash flow?
Net cash flow = Cash inflows - Cash outflows for a given period of time
What does it mean if a company makes a profit?
It means that the company earns more money than it spends.
What does a cash flow forecast show?
A cash flow forecast lists all the inflows and outflows of cash that appear in the budget.
What could a lack of cash lead to?
A lack of cash could lead to the firm failing, because it may be unable to pay its debts =, unless it sells of its assets.
what are the short-term sources?
Trade credit and overdrafts
what are the long-term sources?
Loans, personal savings, share capital, venture capital, retained profit, and crowdfunding.
