finance Flashcards
what is meant by profit
the difference between the total revenue of a business and total costs of a business, when revenue is greater than cost
how do you calculate profit
Total revenue - Total costs = profit
how do you calculate total costs
fixed costs + variable costs = total costs
how do you calculate contribution
contribution = selling price - variable costs
how do you calculate break even
break even = fixed costs ÷ contribution per unit
how do you calculate turn over
turnover = selling price x quantity sold
what is turnover (revenue)
the value of sales / income / revenue of a business / money made from selling goods or services
what is contribution
the amount taken from the cost of selling every good used towards paying the fixed costs of producing that good. contribution per good is selling price minus the cost of the good
what is meant by total costs
the full amount of money spent by a business when producing the goods sold in a particular period. it is calculated by adding it’s fixed costs to its variable costs
what is a variable cost and give examples
a cost that changes with the number of goods produced / sold / output
examples:
raw materials
electricity
gas
what is a fixed cost and give examples
costs which do not change with the number of goods made or sold
examples:
rents for the shops
monthly lease on equipment and machinery
payment of business rates if premises
what is break even
occurs where’s the total amount of money taken in by a business is the same as the amount of money paid out. neither a profit nor a loss is made where total revenue equals total cost
