1.3 - Putting a business idea into practice Flashcards
1.3.1 - Business aims and objectives 1.3.2 - Business revenues, costs and profits 1.3.3 - Cash and cash flow 1.3.4 - Sources of business finance
1.3.1 - What are financial objectives and some examples of this?
Targets expressed in money terms such as making a profit, earning income or building wealth:
- Survival
- Profit
- Wealth
- Income
- Financial Security
Market Share
1.3.1 - What are non-financial (social) objectives and some examples of this?
Targets that are not expressed in money terms:
- Personal Satisfaction
- Challenge
- Independence
- Control
- Helping Others
1.3.2 - What is the formula for profit?
Sales Revenue – Total Cost
1.3.2 - What is the formula for sales revenue?
Selling Price x Sales Volume
1.3.2 - What is the formula for total costs
Fixed Cost + Variable Cost
1.3.2 - What is the formula for variable cost?
Cost per Unit x Sales Volume
1.3.2 - How do you calculate interest?
Total Repayment – Borrowed Amount
Interest = _______________________________
Borrowed Amount x 100
1.3.2 - What is the break-even point and how do you calculate it?
The level of output where total revenues are equal to total costs; this is where neither a profit or loss is being made:
Fixed costs
__________________________
Sales price - Variable cost per unit
1.3.2 - What is a margin of safety?
The amount of output between the actual level of output where profit is being made and the break even level of output.
- 3.2 - What happens to the break even point if:
a) Costs go up
b) Your sale price goes up
a) It becomes larger (further along on a chart)
b) It becomes smaller (Closer on a chart)
1.3.3 - What is cash flow?
The movement of money into and out of the business. Cash is used to pay the day-to-day expenses of a business.
1.3.3 - Why is cash flow important to a business?
- To pay its expenses (Suppliers overheads employess etc.)
- The prevent business failure (insolvency)
1.3.3 - How is net cash flow calculated?
Total cash flow in - Total cash flow out
1.3.4 - What is the difference between long and short - term sources of finance?
LT: Sources of money for businesses that are borrowed or invested typically for more than a year.
ST: Sources of money for businesses that may have to be repaid either immediately or fairly quickly, such as an overdraft, usually within a year.
1.3.4 - What is Overdraft Facility?
Borrowing money from a bank by drawing
more money than is actually in your account. Interest is charged on the amount overdrawn.