1.3-putting Business Ideas Into Practice Flashcards
What are business aims and objectives
-these give businesses a direction and provide a purpose for a business
What is a business aim
-overall target or goal of the business
What are business objectives
-the steps a business needs to take to meet its overall aims
What acronym do business objectives fall into
S-specific
M-measurable
A-agreed
R-realistic
T-time bound
What are financial aims and objectives
-financial aims and objectives are linked to money
What are examples of financial aims and objectives
-Business survival
-profit
-sales
-market share
-financial security
What are non financial aims and objectives
-not linked to making money
-usually linked to personal reasons
What are some examples of non financial aims
-social objectives
-personal satisfaction
-challenge
-control
-independence
Why do aims and objectives differ between businesses
-different sectors
-business size and scale
-personal goals
What is break even and what is the calculation
Break even is the point at which revenue and total costs are the same
Break even =
fixed costs/(selling price-variable costs)
How do we calculate variable costs
Variable costs per unit x number of units
How do we calculate revenue
Sales price x number of units sold(output)
What is margin of safety and what is the calculation
The amount of sales can fall before the break even point is reached and the business makes no profit
Margin of safety=
Actual sales-break even sales
What is the impact of increasing and decreasing costs on a business
-Increasing costs usually has a negative impact on a business and usually increases BEP
-decreasing costs are usually a positive thing for a business as long as the quality stays the same, likely to lower BEP
What is the benefit of increase in revenue in a business
-profits are likely to increase
-allows business to get past BEP
-increases margin of safety
-only applies if costs stay the same
What is the negative impact of decrease in revenue
-bad for businesses
-at risk of not breaking even or having low margins of safety or profit
How is profit represented on a break even graph
-anything above break even point
How is loss presented on a break even graph
Anything below the break even point
What is cash flow
The flow of money in and out a business
Net cash flow =
Cash inflow - cash outflow
What are fixed costs
-costs the do not vary with output
What are variable costs
Costs that change directly with output
What are some example of fixed costs
-rent
-advertising
-insurance
What are some examples of variable costs
-material/packaging
-fuel/electricity bills
-wages for part time/flexible workers
What is the formul for total costs
Total variable costs + fixed costs
What is the formula for interest on loans
(Total repayment-amount borrowed
/ amount borrowed ) x100
Why is cash important to a business
-pay suppliers
-to pay wages
-repay bank loans
What is cash inflow
Cash coming into a business
What is cash outflow
Money coming out of a business
What is opening balance
-money in the bank account at the beginning of the month
What is the closing balance
-money in a business at the end of the month
What is the formula for closing balance
Net cash flow+opening balance
What is the formula for opening balance
Opening balance is the same as the closing balance of the previous month
