lo4 Flashcards
financial terms
- costs
- revenue
- cash flow
- profit/loss
- break-even point
- margin of safety
costs
financial expense of running a business
- fixed costs - not affected by how much the business makes or sells - heating and lighting, business rates, salaries - have to be paid
- variable costs - vary directly with output - raw materials, packaging materials, wages
revenue
- the income a business receives
- also known as sales revenue, credit sales, bank interest received
- examples - cash sales, credit sales, bank interest reciexed
cash flow
movement of money in and out of a business
- inflow
- outflow
- net cash flow, the difference between cash inflow and cash outflow
profit/loss
difference between firms revenue and a firms costs
break-even point
revenue is equal to costs
- making no profit or a loss (covered costs)
margin of safety
- measures of how close a business is to its break even level
- measures the margin of safety effectively how far sales can fall before a business stops making profit
how do you calc profit
revenue - costs
how do you calc break-even
selling price - variable costs
what is an income statement used for
report the profit or loss the business has made
statement of financial position
produced to show what a business is worth a given moment in time
assets
what a business owns
liabilities
what the business owes
capital
owners funds that are financing the business
cash flow statement
actual cash inflow and outflow over a time period
