2.2 Financial Planning Flashcards
Liability
Legal responsibility to pay money owed by business
Unlimited Liability
No legal separation between owners and businesses (sometimes referred to as unincorporated businesses) e.g soletraders and partnerships
Limited Liability
Legal separation between shareholders of firm (sometimes referred to as incorporated businesses) e.g PLCs and LTDs
Insolvency
Company unable to repay creditors
Business Plan
Document forecasting business objectives
Cash Flow Forecasts
Prediction of cash flowing into and out of business, measures solvency
Sales Forecast
Prediction of sales revenue based on historical number of sales, current market research and trends
Sales Revenue
Value of sales over a period of time. Also known as turnover.
Sales Volume
The quantity of output sold in a particular time period
Fixed Costs
Costs that don’t change with the level of production e.g rent, salaries, interest
Variable Costs
Costs that change with the levels of production e.g raw materials, wages, commission
Average Cost / Unit Cost
The cost of producing one unit
Total Cost
The entire cost of producing at a given level
Semi-variable costs
Costs that combine elements of both fixed and variable costs e.g. worker paid a
set salary (fixed cost) plus a bonus for each item produced (variable cost)
Contribution
Profit made on each product which can be used to cover fixed costs
