KEY TERMS

Question 1

what are start up costs?

Answer 1

the amount of money spent setting up a business before it starts trading

Question 2

what are operating cost ?

Answer 2

money spent on a regular basis to keep a business running

Question 3

what is income?

Answer 3

money which is paid into a business

Question 4

what are fixed costs?

Answer 4

expenditure on items which does not change with

the number of items sold or produced

Question 5

what are variable costs?

Answer 5

costs which vary according to the number of items sold or produced

Question 6

what are total costs?

Answer 6

the total amount of money spent running a business over a certain period of time (e.g. a month)

Question 7

what is expenditure?

Answer 7

money that a business spends

Question 8

what are over heads costs?

Answer 8

the everyday running costs of a business

Question 9

what is profit?

Answer 9

occurs when revenue is more than expenditure

Question 10

what is loss?

Answer 10

occurs when expenditure is more than revenue

Question 11

what is budgeting?

Answer 11

planning the future expenditure and revenue targets with the aim of ensuring a profit is made

Question 12

what is budgetary control?

Answer 12

the process of checking what is actually happening, comparing this with the plan and taking action if things are not correct

Question 13

what are cash inflows ?

Answer 13

the amounts of money entering a businesses bank account

Question 14

what are cash outflows?

Answer 14

the amounts of money leaving a businesses bank account

Question 15

net cash flow

Answer 15

the difference between the cash inflow and outflow figures over a particular time period

Question 16

cash balance

Answer 16

the amount of money forecast to be in the bank account after the net cash flow figure has been added or subtracted from the existing bank balance

Question 17

over draft

Answer 17

this occurs if a business pays more out of its bank account than it has in credit. the bank may allow this but will make an extra charge

Question 18

capital

Answer 18

money spent by the business on items which should last a long time (assets)

Question 19

costs of sales

Answer 19

the costs of producing a product

Question 20

gross profit

Answer 20

the money made from selling a product (the sales revenue) after the cost of producing that product (costs of sales) has been deducted

Question 21

net profit

Answer 21

the money made from selling a product after all costs (expenditure) have been deducted from the gross profit.