Finance Flashcards

1
Q

Break even point formula

A

fixed costs/ (sales revenue- variable costs)

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2
Q

Revenue formula

A

Quantity x selling price per unit

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3
Q

Total costs formula

A

Fixed costs + variable costs

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4
Q

Total variable costs formula

A

Quantity x variable cost per unit

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5
Q

Gross profit formula

A

Revenue - Cost of sales

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6
Q

Net profit formula

A

Gross profit - Expenses

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7
Q

Gross profit margin

A

(gross profit / revenue) x 100

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8
Q

Net profit margin formula

A

(Net profit / revenue) x100

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9
Q

Average rate of return (ARR%) formula

A

(Average annual profit / cost of investment) x100

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10
Q

Net cash flow formula

A

Total cash inflow - total cash outflow

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11
Q

Margin of safety formula

A

Actual sales - break even point

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12
Q

What is cash?

A

all money that comes into a business

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13
Q

What is profit?

A

the money the business retains

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14
Q

What are examples of internal sources of finance?

A
  • personal or business savings
  • retained profits
  • selling fixed assets
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15
Q

What are examples of external sources of finance?

A
  • bank loans
  • overdraft
  • new partners
  • owners’ capital
  • trade credit
  • government grants
  • crowd funding
  • retained profits
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16
Q

What do cash flow forecasts do?

A
  • helps firms to anticipate problems
17
Q

What are the 3 main reasons for poor cash flow?

A
  • poor sales
  • overtrading
  • poor business decisions