Business Finance Key Terms Flashcards
What are costs
Money that goes out of a business
Define start up costs
The initial expenses a business pays when starting a business
Define operating costs
Day to day expenses needed to keep the business running
What is Direct costs
A cost linked to the production of the product or service.
What is indirect costs
Cost that is not linked to a product or service
What is revenue
Money going into a business
Formula for total costs
FIXED COSTS + VARIABLE COSTS
How do you calculate revenue
Quantity sold x price per unit
What is expenditure
Money a business pays out
Define overheads
Everyday running costs of the business
Profit
When revenue is greater than expenditure
Loss
When expenditure is greater than revenue
Break even
When you make no profit or loss
Revenue and costs are equal
Budget
A Plan of inflows and outflows in an organisation
Revenue budget
A financial plan that shows how much money is going to come in roughly a year
Expenditure budget
A plan of expected outflows within the business
Budgetary control
A process of checking the planned budget of a business
Cashflow forecast
The prediction of inflows and outflows within a business
Net monthly
The difference between the predicted inflows and outflows for each month
Opening balance
Closing balance
Credit
Borrowing money and paying it back later
Cost of sales
The cost To make a product or service
Formula for gross profit
REVENUE- COST OF SALES
What is gross profit
The profit that is made on each item that is sold
Formula for Net profit
REVENUE- TOTAL COSTS
What is a financial statement
A document that shows how the business is doing financially
What is an income statement
A document that shows the profit and loss of a business
Statement of financial position
Document that shows the assets and liabilities of a business and where the money has come from
Assets
Something a business owns
