finance TO FINISH Flashcards
what are 3 examples of fixed costs?
- salaries
- rent/mortgage
- insurance
what are 3 example of variable costs?
- raw materials
- packaging
- finished products
give 3 examples of cash inflows…
- sales of production
- loans received
- rent charged
give 3 examples of cash outflows…
- raw materials
- expenses
- suppliers
what is return on investment?
making sure you get the best financial return from investments
how do you calculate ROI?
ROI/ cost OI x 100
what are 3 factors influencing investment decisions?
- interest rates stops unnecessary loans
- availability of finance
- competitors actions
what is the difference between forecasting and budgeting?
forecasting is predicting profit and outcomes whereas budgeting limits expected expenses and revenues
what are the 3 types of budgeting?
income budget, expenditure budget, profit budget
what is meant by profitability?
a measure of finance performance taking a single year’s profitability to demonstrate how the business has performed in a single year
what is margin of safety?
the gap between the break - even point and amount sold : businesses want this to be as big as possible as it creates profit
what happens within the cash flow cycle?
- stocks are ordered from suppliers
- production turns stocks into products
- stocks are held until a customer is found
- products are sold to customers
- customers pay for their purchases
what is debt factoring?
when assets are traded for cash by receivables being sold to a factoring company and the right to collect their debt is sold
what is a bank overdraft?
an external source of finance which is flexible and easy to arrange or withdraw at short notice
what are the features of a bank loan?
- provided over a fixed time period
- security required
- greater certainty of funding, lower interest rates
- hard to get and small/new businesses are often excluded
