L04 Flashcards
What is a fixed costs ?
A cost that doesn’t change as outputs go up
Examples of fixed costs are:
Rent + lease costs + salaries (yearly) + utility bills + insurance + loan repayments
What is a variable cost ?
A cost which varies directly to the output of money
Examples of variable costs are :
Raw materials + piece-rate labor + production supplies + commissions + delivery costs + packaging supplies + credit card fees
What is revenue ?
Is the total amount of income generated by the sale of goods and services related to the primary operations of the business
Formula for revenue is :
Total revenue = quantity ( number of units sold) x price (average sales price per unit)
What is a cash flow ?
Is the net amount of cash and cash equivalents moving into and out of a business
What is a negative cash flow ?
Indicates that a company’s liquid assets are decreasing
What is net cash flow ?
Is the difference between a company’s inflows and outflows
Formula for net cash flow is :
Net Cash Flow = Total Cash Inflows – Total Cash Outflows
What is a breakeven point ?
When revenue is equal to costs
Formula for break even point :
1) BEP = fixed cost /selling price per unit - variable cost per unit
2) BEP = fixed cost / contribution margin per unit
Formula for break- even output :
B-E output = total fixed cost / variable costs
What is margin of safety ?
Indicates the amount by which a company’s sales could decrease before the company will be unprofitable
Formula for Profit / Loss :
Profit = Total Revenue - Total Expenses
Loss = Cost prices - selling prices
What is loss ?
Is the deficit of revenue after paying total costs
What is profit ?
Is the surplus left over from revenue after paying total costs
Formula for break-even :
Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)
what is an income statement ?
A financial statement that shows the revenue and expenses a business has received and paid over a period of time; the statement will show the profit the business has made during this time.
What is a statement of financial position ?
Communicates information about the financial health of the business and indicates the relative liquidity of the assets
What is a cash flow statement ?
A financial accounting statement that shows the actual cash inflows and outflows for a business over the previous 12 months.
What is a cash flow forecast ?
A management accounting report that outlines predicted future cash inflows and cash outflows per month over a period of time
What is cash flow forecast made up of ?
1) receipts
2) payments
3) net cash flow
