Business 1.3 Flashcards
Formula for profit
Profit = TR - TC
Formula for TR
TR = P x Q
Formula for TC
TC + FC
Formula for BEO
BEO = FC/P - VC
Formula for contribution per unit
Contribution per unit = P - VC
Formula for total contribution
Total contribution = (CP - VC) x number of units sold
Formula for MoS (Margin of Safety)
Current output/sales - break even output
Disadvantage of a bank loan
Have to pay interest
Examples of fixed costs
Rent, mortgage, managers’ salaries
Examples of variable costs
Raw materials, wages of workers, energy bills
Different points on a break even chart
TC, FC, total revenue, BEO, BEP
External sources of finance
A bank loan, trade credit, crowdfunding, overdraft, venture capital
Examples of financial aims
Survival, profit, sales, market share, financial security
Examples of non financial aims
Social objectives, personal satisfaction, challenge, indepedence, control
The difference between cash and profit
Cash flow is the cash that flows in and out from a business throughout a period of time whereas profit is the TR - TC
Formula for opening balance
Opening balance = previous closing balance
Formula for net cash flow
Net cash flow = cash inflows – cash outflows
Formula for closing balance
Closing balance = net cash flow + opening balance
Short term sources of finance
Overdraft and trade credit
Long term sources of finance
Personal savings , venture capital, share capital loans, retained profit crowd funding
3 mark ‘explain’ question structure
Point, explain, example
6 mark ‘discuss’ and ‘analyse’ question structure
1 or 2 points with 5 interconnected strands
