1.3 - Putting A Business Idea Into Practice Flashcards
What is an aim and objective of a business?
Aim - overall goals that a business wants to achieve
Objective - smaller aims that will help complete the making aim
What are financial aims of a business?
5 aims
- Survival
- Maximise profit
- Increase market share
- Maximise sales
- Achieve financial security
What are non-financial aims of a business?
- Personal challenge
- Personal satisfaction
- Independence + control (own boss)
What is revenue and how is it calculated?
- The amount of money the business makes
- Revenue = Quantity sold X Price
What are costs? (And 2 types of costs)
Costs are expenses the business pays out
- Variable costs
- Fixed Costs
(Total costs are both added together)
How are variable costs calculated?
Variable costs = quantity sold X cost per unit (material and manufacturing)
What are fixed costs?
Costs that don’t change because of businesses output:
- Rent
- Insurance
- Fixed salaries
- Advertising
What is interest?
Interest is added to loans and savings (from a bank)
What is profit and how is it calculated?
The difference between revenue and costs, the amount of money the business makes after costs have been taken away
- Profit = Revenue - Costs
What is break even and how is it calculated?
The amount of sales a business needs to cover its costs.
- Break even point (units) = Fixed costs (divided by) sales price - variable cost
What is margin of safety and how is it calculated?
The gap between the current level of output and the break even point
- margin of safety = actual sales - break even sales
What are cash inflows and outflows?
Inflows - money entering the business
Outflows - money leaving the business
What are the sources of finance?
8 Sources
Short term:
- Trade credit
- Overdraft
Long term
- Loans
- Personal savings
- Share capital (individuals buying shares)
- Venture capital
- Retained profits
- Crowd funding
