Putting A Business Idea Into Practice - 3 Flashcards
Aim
What a business wants to achieve
Objective
How a business will achieve their aim
Profit
Amount of money made (revenue) minus the total cost
Social objective
Action a business will take to help the community- normally non-financial
Revenue
Amount of money made from sales
Fixed cost
A cost which stays the same
Variable cost
A cost which changes - varies through how much a business sells
Total cost
Fixed cost + variable cost
Interest
A percentage change on the amount of money borrowed
Break even point
When the total cost and revenue equal the same amount
Loss
When revenue is lower than total cost
What is the formula for sales revenue?
Revenue = price x quantity
What is the formula for interest
Interest percentage = total repayment - borrowed amount / borrowed amount x 100
What is the formula for break even
Break even = fixed costs
/ sales price - variable cost
Define margin of safety
The amount of sales above the break - even point
Define cash
Money available in the business to pay the bills
Define cash flow
The movement of money into and out of the firm accounts - difference between cash into and out of a business over time
Define inflows
Money coming into business
Define outflows
Money coming out of a business
Define opening balance
If the business has been trading then it will be whatever cash is available at the start of the month
Define Closing balance
How much cash is available at the end of the month to be carried over to the next month as an opening balance
Examples of Short term raising finance
-Overdraft
- trade credit
Examples of long term raising finances
- personal savings
- venture capital
- share capital
- loans
- retained profit
- crowdfunding
Define short term finance
Money that is needed to finance activities that are usually going to last less than one year. Generally used for day to day operations
Define long term finance
Finance that is needed over a period of time- over a year or many years
