Chapter 2 Flashcards
Business plan
Describes a business’ goals and its plans for achieving those goals
Risk
Amount of uncertainty that exists about the future operations of a business
Return
Money received from investment and credit decisions
Short term capital
Capital which will be repaid within a year or less
Line of credit
Amount of money a business is allowed to borrow with a prearranged, agreed-upon interest rate and a specific payback schedule
Long term capital
Capital which will be repaid to creditors or returned o investors after more than one year
Cost volume profit analysis
Shows how profit is affected by changes in sales volume, selling prices of products and various costs of a business
Volume
Activity level in a business
Cost-volume-profit analysis
Shows how profit is affected by changes in sales volume, selling prices of products and the various costs of a business
Volume
Activity level in a business
Fixed costs
Costs that are constant in total and that are not affected by changes in volume
Relevant range
Range of volumes over which cost estimates are needed for a particular use and over which observed costs behaviours are expected to remain stable
Variable cost
Cost that is constant per unit and that changes in total in direct proportion to changes in volume
Total costs
Sum of the fixed costs and variable costs at a given volume
Break-even point
Unit sales volume at which a business earns zero profit
