5.4b Interesting Flashcards
interest on loans is calculated using this equation
interest is % =
total repayment- borrowed amount/borrowed amount * 100
what is interest ?
when businesses borrow money from a bank, which us a percentage of the amount of money borrowed that must be repaid in addition to the original amount borrowed. this total amount is then divided by the number of months over which the business has agreed to pay back the money
the break even point in units tells the business how many units it needs to sell in order to meet the break-even point
break-even point =
fixed costs / (sales price - variable)
the break even point in currency tells the business how much money needs to be taken to meet the break even point
break even point in currency - break even point in units * sales price
break even point
the point where revenue received meets all of the costs of a business
margin of safety
once a business has reached its break even point, it needs to continue to grow and increase in order to succeed. it is important that a trend in sales growth continues to well above the break even point, as this will allow the business to return a healthy profit.
the margin of safety is how much sales can fall before the business’s break-even point is reached again
margin of safety = actual or budgeted sales - break even sales
a break even diagram is a way of showing a business’s break even point
the costs and revenue are plotted against the vertical axis of the chart and the number of products or services sold against the horizontal axis
Interest rate
The percentage rate used to work out the amount of interest that must be paid
What does bank of England do?
Monitor inflation and sets interest rates
How does high interest rates impact saver?
Savers are paid more money for keeping their money in the bank
How does high interest rate impact borrowers?
Borrowers have to pay more money to borrow from a bank, meaning that they have less to spend
How does low rates impact on savers?
Savers are paid small amounts of money for keeping their money in the bank, m we meaning that they have less to spend
How does low interest rates impact on borrowers?
Borrowers have to pay smaller amounts of money to borrow from a bank, meaning that they have more leftover to spend
How interest rates affect business?
They influence the way consumers behave
