1.3 Putting a business idea into practise Flashcards
(28 cards)
What are the 4 financial aims?
Financial aims:
- Survival (enough money to stay open)
- Profit (more money going in than coming out)
- Maximise sales
- Financial security ( own revenue for funding)
What are 3 non financial aims?
Non financial aims:
- Personal challenge
- Satisfaction
- Independence (own boss)
What 3 factors affect business aims?
Factors affecting business aims:
- Size/age of business (new business focus on survival)
- Owner
- Competition (low competition = focus on survival)
What is revenue?
Revenue:
- Income earned by a business
What is the equation for calculating revenue?
Calculating revenue:
- Revenue = quantity sold x price
What is fixed cost?
Fixed cost:
- Does not change with amount business produces
What are examples of fixed costs?
Fixed costs:
- Rent
- Insurance
- Advertising
- Salaries
What are variable costs?
Variable costs:
- Costs that can increase or decrease
What are examples of variable costs?
Variable costs:
- Raw materials
- Running machinery
What is the equation for calculating total variable cost?
Total variable cost:
- Total variable cost = quantity sold x variable cost per unit
What is interest?
Interest:
- Charge for borrowing money
How do you calculate interest?
Interest:
Interest = total payment - borrowed amount
––––––––––––––––––––––––––––––––– x 100
Borrowed amount
How do you calculate profit?
Profit:
- Profit = revenue - costs
What is break-even?
Break-even:
- Amount of sales needed to cover the costs
How do you calculate break-even in units?
Break-even in units:
Fixed cost ––––––––––––––––––––––––– Sales price - variable cost per unit
How do you calculate break-even point for revenue?
Break-even point for revenue:
- Break-even point for revenue = break-even point in units x sales price
What does a low break-even out put mean?
Low break-even output:
- Business sells less to make a profit
What is margin of safety?
Margin of safety:
- Gap between current output and break even output
How do you calculate margin of safety?
Margin of safety:
- Margin of safety = actual/budgeted sales - break-even sales
What is cash
Cash:
- Spent immediately
- Spent on employers, suppliers and overheads
What is profit?
Profit:
- Calculated after reducing costs
What is cash flow?
Cash flow:
- Flow of money coming in and going out of a business
How do you calculate net cash flow?
Net cash flow:
Net cash flow = cash inflows - cash outflow
What is a cash forecast
Cash forecast:
- All inflows and outflows of cash