finance Flashcards
gross profit margin?
gross profit divided by revenue x 100
gross profit definition?
total revenue - cost of goods sold
net profit margin equation?
net profit divided by revenue x 100
net profit?
total revenue minus total expenses
average rate of return definition?
way of comparing profitability of different choices over the expected life of an investment
average rate of return equation?
average annual profit divided by initial investment x 100
margin of safety meaning?
difference between actual sales and break even sales
margin of safety equation?
actual sales minus break even point/
output minutes break even point
sources of finance?
- bank loans 2. retained profit 3. hire purchase 4. trade credit 5. government grant 6. overdraft 7. new shares issue 8. family and friends 9. selling of assets (unwanted) 10. mortgage 11. owners funds
trade credit?
business gives you the product and then you agree on a later date to pay for it
hire purchase?
buying assets in instalments (typically per month for a certain amount of years)- product is not fully owned by the business until the final payment is made.
retailer?
someone who directly sells products to the customer
wholesaler?
- business that buys in large quantities of products from producers, break bulk and sell to retailers
- break bulk= transporting pieces of goods individually, instead of shipping in one container
non-current asset (fixed asset)
an asset that a business intends on keeping/owning for over a year
- for example, cars, property, equipment
current asset
an asset that a business intends on keeping/owning for less than a year and is cash/ can easily be turned into cash
- for example, stock or money owned from customers
