Finance Flashcards
What is Revenue?
Selling price x number of units sold
What are Variable Costs?
Variable cost per unit x units produced
What are Total Costs?
Fixed costs + Variable costs
What is Profit?
Total Revenue - Total Costs
What is Gross Profit?
Revenue – Cost of Sales
What is Net Profit?
Gross Profit – Total Expenses
What is Gross Profit Margin?
Gross profit / Revenue X100
What is Net Profit Margin?
Net profit / Revenue X 100
What is the purpose of the finance function?
The finance function provides financial information, supports business planning, and aids decision making.
How does the finance function influence business activity?
The finance function influences business activity by providing essential financial data for planning and decision making.
Why do businesses need finance?
Businesses need finance for establishing a new business, funding expansion, running the business, recruitment, and marketing.
What are some ways of raising finance?
Ways of raising finance include loans, overdrafts, trade credit, retained profit, sale of assets, owners’ capital, new partners, share issues, and crowdfunding.
What is the importance of revenue, costs, and profit/loss in business?
Revenue, costs, and profit/loss are crucial for business decision-making.
What types of costs are there in operating a business?
Types of costs include fixed costs, variable costs, and total costs.
How do you calculate profit/loss?
Profit/loss can be calculated by subtracting total costs from total revenue.
What are profitability ratios?
Profitability ratios include gross profit margin and net profit margin.
What is the concept of break-even?
Break-even occurs when total costs equal total revenue.
How is break-even quantity calculated?
Break-even quantity can be calculated using the formula where total costs equal total revenue.
What is the importance of cash to a business?
Cash is important for providing liquidity and enabling the business to meet short-term debts and expenses.
What is the difference between cash and profit?
Cash refers to liquid assets, while profit is the financial gain after expenses are deducted.
What is cash flow forecasting?
Cash flow forecasting is a planning tool that anticipates periods of cash shortage and enables remedies to be put in place.
