Equations And Financial Terminology Flashcards
Equation for profit
Revenue - total costs. When answer is above £0
Equation for loss
Revenue - total costs when answer is below £0
Equation for total costs
Fixed costs + variable costs
What is revenue
All of the money which is coming into the business
Cash flow
The money coming in and out of a business over a period of time
Sales
Number of products sold by the business
Equation for average rate of return
Expected yearly profit divided by initial investment times by 100
How to calculate average yearly profit
Total profit divided by how many years it has been
Break even
When the total costs and the amount of revenue are the same
What is the margin of safety
The margin of safety is the difference between current level of production and the break even level of production. E.g BE = 40. Current = 60. 60-40=20
Gross profit
Revenue of sales - costs of sales, usually over a year
Net profit
Revenue from sales - total costs of sales and overheads e.g rent and other costs. Usually over a year
Balance sheet
Sets out assets and liabilities over that a business has on a particular day
Income statement
Financial statement showing a businesses revenues and costs
A financial ratio
Compares two figures from a businesses finacial statement
