Putting a business into practice Flashcards
Financial Objectives
Targets expressed in money terms such as making a profit, earning income or building wealth.
SMART
Specific, measurable, achievable, realistic and timed
The amount of income received from selling goods or services over a period of time .
Revenues
Sales Revenue
Turnover
Sales Turnover
What is the equation for total revenue?
Price x Quantity = Total Revenue
Sales volume
The number of items or products or services sold by a business over a period of time.
What are fixed costs and give two examples?
Costs that don’t vary with the output produced.
Examples : rent, advertising costs, wages and salaries
Total Costs are…
all the costs of the business. It is equal to the fixed costs plus variable costs.
What is the equation for total costs ?
Fixed Costs + Variable Costs
Variable Costs are…
costs which change directly with the number of products made by a business. E.g. stock and materials, utility bills.
When total revenue is greater than total costs…
Profit
When total costs are greater than total revenue…
Loss
What is the equation for profit?
Total Revenue - Total Costs
The flow of cash in and out of a business
Cash Flow
The cash flowing into a business, its receipts
Inflows
The cash flowing out of a business, its payments
Outflows
Net Cash Flow
Inflows – Outflows = Net Cash Flow
When a business can no longer pay off its debt
Insolvency
Cash Flow Forecast
A prediction of how cash will flow through a business in a period of time in future
The amount of money in a business at the start of the month
Opening Balance
The amount of money in a business at the end of the month
Closing Balance
Trade Credit
Where a supplier gives a customer a period of time to pay a bill for goods or services once they have been delivered
Stocks
Materials that a business holds
Long term finance
Sources of money for businesses that are borrowed or invested typically for more than a year e.g Mortgage, Venture Capitalist
Short term fianance
Sources of money that is fairly easy to pay and doesnt require long to receive
Money that has been set aside and not spent by individuals and households.
Personal Savings
Share Capital
The monetary value of a company Share Capital which belongs to its shareholders, for example, if five people each invest £10,000 into a business, the share capital will be £50,000
Shareholders
The owners of a business
Venture Capitalist
An individual or company which buys shares in what they hope will be a fast growing company with a long term view of selling the shares at a profit.
What is a loan?
Borrowing a sum of money which has to be repaid with interest over a period of time, such as 1-5 years.
What is a mortgage?
A loan where property is used as security.
A share of the profits of a company received by shareholders who own shares.
Dividend
Retained Profit
Profit which is kept back in the business and used to pay for investment in the business.
Leasing
Renting equipment or premises.
Factoring
A source of finance where a business is able to receive cash immediately for the invoices it has issued from a factor, such as a bank, instead of waiting the typical 30 days to be paid.
