Finance Flashcards
What’s the definition of costs?
Spending that occurs to set up a business
What are fixed costs? And examples
Costs which don’t change in relation to output
- rent, mortgage, loan
What are variable costs? And examples
Costs which change as a result of changes in output
- raw materials, delivery costs, credit card fees
How do you calculate total costs?
Total costs = fixed + variable
What is a direct cost?
A cost that is paid in the making of the product
What is an indirect cost?
A cost that does not go directly into the making of the product
What is the definition of revenue?
Income gained by a business from selling goods and services, a form of cash inflow
How do you calculate revenue?
Revenue = number of sales x price
Where does revenue come from?
- Sales of goods and services
- Credit sales (buy now pay later)
- Other income (shares, interest, rent)
How do you calculate profit?
Profit = total revenue - total costs
What is the definition of cashflow?
A record of the money in and the money out of a business
How do you calculate net cash flow?
Net cash flow = money in - money out
