Key terms Flashcards
Revenue
The income received by an enterprise from selling goods/services
Costs
The costs of running an enterprise;
- start-up costs
- running costs
Fixed costs
Costs that have to be paid regardless of output e.g rent, insurance
Variable costs or cost of sales
Costs that vary according to output e.g raw materials
Total costs
The total costs of running a business
Profit
The reward for running a business
Turnover
Total revenue a business receives in a set period e.g a year
Gross profit
The profit a business makes on selling its products. It considers the direct costs of producing the products (Cost of sales)
Expenses (or overheads)
Includes all the indirect costs of an enterprise e.g all the costs not associated with the products sold, such as salaries and advertising
Net profit
The amount of money left when all the expenses have been paid. It is also called ‘the bottom line’
Assets
Something that an enterprise owns
Fixed assets
An asset that is not sold easily- it cannot be quickly turned into cash e.g building, machinery. Used by the enterprise to make money
Current assets
An asset that can be quickly turned into cash
- Stock
- Debtors (people who owe the enterprise money)
- Cash in bank
Liabilities
Something the business owes (needs to pay back)
Long term liabilities
Debt that will take more than a year to pay back e.g bank loan, mortgage
Capital
The money put into the business to start it up or grow it
- Loan
- Owners money
- Retained profits ( profit from previous years)
Current liabilities
Debt that needs to be paid back within a year- quickly
- Creditors
- Bank overdraft
Net current assets
The money the business has on a day to day basis to pay its short-term debts
Cash
The money a business actually has
- Money in the till
- Money in the bank
Profitability
The ability of an enterprise to turn revenue into profit
Liquidity
The ability of an enterprise to pay its debts
Gross profit margin
The gross profit as a percentage of sales revenue
Net profit margin
The net profit as a percentage of sales revenue
Current ratio
Shows how easily a business can pay its short term debt
Liquid capital ratio
Shows how easily a business can pay its short-term debt without using stock
Debtors
Individuals/business who owe money to the enterprise
Creditors
Individual/enterprises who the enterprise owes money to
Retained profit
Net profit reinvested in enterprise
