Financial Terms And Calculations

Question 1

Revenue

Answer 1

is the income that a firm receives from selling its goods or services. It is also referred to as ‘turnover’.
It is measured by the number of units sold multiplied by the price.

Question 2

Sales

Answer 2

refers to the number of products sold by a business.

Question 3

Costs

Answer 3

Are the spending that is necessary to set up and run a business

Question 4

Fixed costs

Answer 4

Are those costs that do not change when a business changes its output

Question 5

Variable costs

Answer 5

are the costs that vary directly with the businesses level of output

Question 6

Total costs

Answer 6

Are fixed costs plus variable costs

Question 7

Profit

Answer 7

Measures the difference between the value of a businesses revenue (sales) and its total costs

Question 8

Loss

Answer 8

Is the amount by which businesses costs are larger than its revenue from all sales

Question 9

Investment

Answer 9

takes place when a business buys an asset, such as a factory, in the hope of making a profit from its use.

Question 10

The average rate of return(ARR)

Answer 10

compares the average yearly profit from an investment with the cost of the investment and is stated as a percentage.

Question 11

Break-even

Answer 11

is the level of production at which a business’s total costs and revenue from sales are equal.

Question 12

A break-even chart

Answer 12

shows a business’s costs and revenues and the level of production needed to break-even.

Question 13

The margin of safety

Answer 13

measures the amount by which a business’s current level of production exceeds its break-even level of output.