Busniess topic 2 - finance Flashcards
What is “Start-up Capital”?
The money needed to set up a business
What is meant by the term “Hire Purchase”?
A system where goods are rented but which are eventually owned by the business
What is a “Venture Capitalist”?
Money placed into a business by someone wanting to invest in what is likely to be a growing business
Suggest examples of short term finances
Overdraft / Trade credit / Own savings / Retained profit / Family/friends / Bank loan / Credit card
Using examples, what is meant
by the term “Fixed Cost”?
Costs which do not change with output / the number of goods made or sold. E.g. rent
Using examples, what is meant
by the term “Variable Cost”?
A cost that changes with the number of goods produced / sold / output. E.g. raw materials, direct labour
How do you calculate “Total Costs”?
Total Costs = Fixed Costs + Variable Costs
How do you calculate “Total Revenue”?
Total Revenue = Selling Price x Quantity Sold
What is a “Cash Flow Forecast”?
It is a prediction/estimate of the movement of cash into and out of a business
What is the formula for “Net Cash Flow”?
Net Cash Flow = Monthly Total Revenue – Monthly Total Cost
What is the formula for “Closing
Balance”?
Closing Balance = Opening Balance – Net Cash Flow
Why is a cash flow forecast
important?
- May be part of a business plan – when a business wants to borrow money
- Forewarns about future possible cash flow problems
- Helps bank decide whether to give loan – suggests ability to repay
What is “Gross Profit” and how
is it calculated?
Profit left before expenses have been deducted
Gross Profit =
Sales Revenue – Costs of Sales
What is the formula for
calculating the “Gross Profit
Margin”?
Gross Profit / Sales Revenue x 100
What is “Net Profit” and how is
it calculated?
Profit left after expenses have been deducted.
Net Profit = Gross Profit - Expenses
