Putting Business Ideas Into Practice Flashcards
What is break even point?
When you are making the same amount of money as you are paying.
What is the definition of revenue?
Means the value of goods and services that have been sold. It can also been referred to as turnover
What is the formula of revenue?
Revenue=QUANTITY x PRICE
What is fixed cost?
A cost that doesn’t vary with an output e.g rent or bills
What is variable cost?
A cost that directly changes with output which means that they are immediately effected by a change in the number of products that are sold.
What is the formula for total cost?
Variable cost + fixed cost = total cost
What is the formula for profit/loss?
Total cost - revenue = profit or loss
What is interest?
Is the % charged by a bank to borrow money. It is also the % for saving money.
What is the formula for interest?
Amount loaned x (interest % / 100)
What is the formula do gross profit?
Revenue - cost of products (variable cost)
What is the formula of net profit?
Gross profit - expenses (fixed costs)
What is margin of safety?
Shows the business the difference between how many products it’s actually selling too the break even point.
What is the formula for margin of safety?
Actual level of sales - break even point
Benefits of break-even analysis?
It sets a sales target
It suggests whether a business is viable
It helps obtain a bank loan
Limitations of break-even analysis?
All of the costs are estimated
The selling prices are estimated
Businesses don’t just sell one product
