Business BTEC Finance Flashcards
all the key terms that i will need for the BTEC finance test
Example of start-up costs
painting, equipment and decoration
Example of operating costs
stock, wages and utilities
Definition of costs
money out of a business
Definition of start-up costs
one off costs for items businesses need to start up
Definition of operating costs
ongoing costs businesses have to pay on a day to day basis
Definition of fixed costs
costs that do not change with output
Definition of variable costs
costs that change with output
Definition of direct costs
costs that are directly linked to the production of a product or service
Definition of indirect costs
costs that aren’t directly linked to the production of a product or service
Equation for total costs
fixed costs + variable costs
Definition of revenue
money that is going into a business
Equation for revenue
quantity sold x price per product
Definition of expenditure
money that a business pays out
Definition of overheads
everyday running costs
Definition of profit
when revenue is greater than expenditure
Definition of loss
when expenditure is greater than revenue
Definition of break-even
when a business makes no profit and no loss and the revenue and costs are equal
Definition of margin of safety
the difference between the break-even point and the actual units sold
Definition of budget
a plan of inflows and outflows in an organisation
Definition of revenue budget
a plan of expected inflows
Definition of expenditure budget
a plan of expected outflows
Definition of cash flow forecast
a prediction of inflows and outflows of money in an organisation
Definition of opening balance
money carried from the previous months closing balance
Definition of closing balance
the figure in the bank at the end of the month
Definition of credit
the time allowed for someone to make a payment
Definition of cost of sales
the costs needed to make a product or service
Definition of gross profit
profit made on each item that is sold
Equation for gross profit
revenue - cost of sales
Definition of net profit
profit made after all costs are deducted
Equation for net profit
revenue - total costs
or
gross profit - expenditure
Definition of financial statements
documents that show a businesses financial performance
Definition of income statement
something that shows the profit or loss of an organisation
Definition of assets
something that a business owns
Definition of current assets
items that can be turned into cash within the year
Definition of fixed assets
items that take longer than a year to be turned into cash
Definition of trade recievables
customers who have been given credit and owe the organisation
Definition of liabilities
something a business owes
Definition of current liabilities
owes and has to be paid within a year
Definition of long term liabilities
paid in a period longer than one year
Definition of an overdraft
short term bank loan that is usually expensive
Definition of trade payables
people the organisation has to pay who has given it credit
Definition of working capital
the money in the business on a day-to-day basis
Equation for working capital
current assets - current liabilities
Definition of retained profit
profit a business has kept from a previous year
Definition of capital
money
Examples of a fixed cost
rent
Example of a variable cost
raw materials
Definition of sales revenue
the money you make from selling a product
Definition of added value
when you spend more of your money in order to get more money
Examples of expenditure
fuel, loans, advertising and telephone bills
Equation for break-even
Selling Price - Variable Costs
Definition of budgeting
a plan of inflows and outflows in an organisation
What is the purpose of budgeting?
- to see the businesses performance
- to make decisions about their performance
- to identify areas of weakness
- to plan future finance uses
Equation for margin of safety
actual sales - break even
