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GCSE Business Studies > Revenue & Finance > Flashcards

Revenue & Finance Flashcards

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1
Q

What is sales revenue?

A

Money from selling products.

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2
Q

How is sales revenue calculated?

A

Quantity sold x selling price

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3
Q

Give two ways in which businesses can increase sales revenue.

A
  • Change the selling price

- Increase the amount sold

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4
Q

Give three factors that a business should consider when deciding to change prices.

A
  • Number of competitors
  • What competitors do.
  • Whether the product is a necessity.
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5
Q

What is price elasticity of demand?

A

Measure of change in level of demand caused by change in price.

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6
Q

What are fixed costs?

A

Costs that don’t change with output.

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7
Q

Give four examples of fixed costs.

A
  • Rent
  • Salary
  • Business rates
  • Interest on loans
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8
Q

What are variable costs?

A

Costs that change with output.

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9
Q

Give four examples of variable costs.

A
  • Energy
  • Tax
  • Wages
  • Raw materials
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10
Q

What are total costs?

A

fixed + variable costs

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11
Q

What are average costs?

A

Cost of each unit produced

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12
Q

How is average cost calculated?

A

total cost / amount sold

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13
Q

Give four ways in which a business can reduce average costs.

A
  • Spreading fixed costs.
  • Reducing the cost of raw materials.
  • Increasing efficiency of labour.
  • Achieving economies of large scale production.
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14
Q

What is the “short run”?

A

Approx. 12 months

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15
Q

What are fixed assets?

A

Items owned by a business of which value doesn’t change daily.

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16
Q

What is the “long run”?

A

Over 2 years

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17
Q

What is capacity?

A

Amount that a manufacturing facility is designed to produce.

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18
Q

What is above capacity?

A

When the level of production is above the capacity.

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19
Q

What is excess capacity?

A

When the level of production is below the capacity.

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20
Q

What are economies of scale?

A

When the average cost of production decreases as the output increases.

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21
Q

What are technical economies of scale?

A

The business reduces production costs by using better equipment.

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22
Q

What are managerial economies of scale?

A

Business employs specialist managers to improve efficiency.

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23
Q

What are financial economies of scale?

A

Business reduces the cost of loans.

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24
Q

What are risk-bearing economies of scale?

A

Business has a range of products so is less dependent on one product.

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25
Q

What are purchasing economies of scale?

A

The business is given a discount when buying in large quantities.

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26
Q

What are marketing economies of scale?

A

Business saves money on marketing and transport.

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27
Q

What are diseconomies of scale?

A

When average cost increases as production increases.

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28
Q

What is break-even level of output?

A

Level of output at which the business neither makes a profit or loss.

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29
Q

What is a break-even forecast?

A

Prediction of break-even level output based on estimated selling price and costs.

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30
Q

What is the margin of safety?

A

Amount by which a business’ output is greater than its break-even output.

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31
Q

Give five factors which affect the size of a business.

A
  • Size of the market
  • Amount of capital needed.
  • Economies and diseconomies of scale.
  • Motives of the owner(s).
  • Co-operation by firms.
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32
Q

Give three reasons why a break-even analysis should be treated with care.

A
  • Forecast figures may change.
  • Figures only relate to one product.
  • It presumes all output is sold.
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33
Q

Which lines start at the origin on a break-even graph?

A
  • Variable costs

- Sales revenue

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34
Q

Which line is parallel to the x-axis on a break-even graph?

A

-Fixed costs

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35
Q

Which line starts at the total fixed cost line on a break-even graph?

A

Total costs

36
Q

How is break-even calculated?

A

fixed costs / (selling price - variable cost per unit)

37
Q

What is a business sponsor?

A

A business which pays money to another organisation.

38
Q

What is an opportunity cost?

A

The cost of missing out on something else.

39
Q

What is internal finance?

A
  • Finance from within the business.
  • Finance with no cost.
  • Money that cannot be used for anything else.
40
Q

What is external finance?

A
  • Finance from outside the business.
  • Usually a cost.
  • Assets are provided as security.
41
Q

What is interest?

A

The amount of money that is paid for borrowed money.

42
Q

What is an asset?

A

Item of value owned by the business.

43
Q

What is security?

A

Something of value offered to the lender as a guarantee of payment.

44
Q

Give seven reasons why a business might need finance?

A
  • Starting up costs.
  • Internal growth.
  • Takeover of another company.
  • Replacing old equipment.
  • Moving to new premises.
  • Cash-flow problems.
  • Research and development.
45
Q

Give one short term internal source of finance.

A

Cash in the bank

46
Q

Give two medium term internal sources of finance.

A
  • Retained profit

- Sale of assets

47
Q

Give two long term internal sources of finance.

A
  • Retained profit

- Owners’ investment

48
Q

Give two short term external sources of finance.

A
  • Overdraft

- Trade credit

49
Q

Give four medium term external sources of finance.

A
  • Bank loan
  • Lease
  • Hire purchase
  • Grants
50
Q

Give six long term external sources of finance.

A
  • Bank loan
  • Mortgage
  • Taking a new partner
  • Share issue
  • Lease
  • Hire purchase
51
Q

What is an overdraft?

A
  • An arrangement with the bank whereby a business is able to withdraw more money than it has in an account.
  • Used to overcome short term shortage of funds.
  • Overdrafts usually have a set cost.
52
Q

What is trade credit?

A
  • The business buys goods but doesn’t have to pay immediately.
  • Usually interest free.
53
Q

What is retained profit?

A
  • Profit made by the business kept for later use.
  • No cost.
  • Opportunity cost.
54
Q

What is sale of assets?

A
  • Selling something the business owns.
  • No cost.
  • Opportunity cost.
55
Q

What is a bank loan?

A
  • Money borrowed from the bank.

- Interest payable.

56
Q

What is a lease?

A
  • Items property of the business for a set period of time.

- Monthly payments made.

57
Q

What is hire purchase?

A
  • Obtaining items for a monthly fee.

- Property of the business after full cost paid.

58
Q

What are grants?

A
  • Amount of money made available for a specific purpose buy the government.
  • Doesn’t need to be repaid.
  • Money has to be used for specific purpose.
59
Q

What is the owners’ investment?

A
  • Owner invests money into the business.

- No cost to the business.

60
Q

What is cash in the bank?

A
  • Money owned by the business.

- Only opportunity cost.

61
Q

What is a mortgage?

A
  • Long term method of finance (25 years or more)]
  • Requires security.
  • Used to buy property.
  • Lower interest rates.
62
Q

What is taking a new partner?

A
  • New person invests.
  • Extra finance and skills available.
  • New partner has a say in business running.
  • Profits split with new partner.
63
Q

What is share issue?

A
  • Source only for limited companies.
  • Investors pay for a share in the business.
  • Dividends paid to shareholders.
  • Shareholders have a say in the business.
64
Q

How are public corporations funded?

A
  • Income tax
  • VAT
  • Excise duty
65
Q

What is profit?

A

Money left from sales after costs are paid.

66
Q

What is gross profit?

A

sales revenue - cost of sales

67
Q

What is a profit margin?

A

Difference between selling price and cost of the item.

68
Q

What is net profit?

A

gross profit - fixed costs

69
Q

What is a mark-up?

A

Amount added to purchase price to give selling price.

70
Q

What is return on investment?

A

Amount that the business receives for providing finance to business.

71
Q

What are drawings?

A

Business profits paid to owners of sole trader/partnership.

72
Q

What is retained profit?

A

Profit kept by the business for its own use.

73
Q

What is a trading profit and loss account?

A

Details of costs and revenue of a business used to calculate profit.

74
Q

What is break-even analysis?

A

Technique used for estimating costs, revenue and profit/loss.

75
Q

How is profit margin calculated?

A

(gross profit / buying price) x 100

76
Q

Give six factors that affect the amount of profit/loss.

A
  • Type and size of business
  • Objectives of the business
  • Demand for product
  • The price consumers are willing to pay
  • The way costs are controlled
  • Amount of competition
77
Q

What is income?

A

Money the business receives.

78
Q

What is expenditure?

A

Money the business pays out.

79
Q

What is a cash-flow forecast?

A

Statement showing flow of money in and out of the business.

80
Q

What is balance carried forward?

A

Amount of cash left over at the end of the month.

81
Q

What is positive cash flow?

A

More cash coming into the business than leaving.

82
Q

What is negative cash flow?

A

More cash leaving the business than coming in.

83
Q

What is total income?

A

Balance brought forward + income

84
Q

How is balance carried forward calculated?

A

total income - total expenditure

85
Q

Since you’ve been using these flashcards for free, please consider making a small donation for the hundreds of hours it took to make them.

A

http://bit.ly/21T6H3W

Thank you and good luck!

GCSE Business Studies (14 decks)

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