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Terminology Flashcards

1
Q

What is sales turnover?

A

Sales turnover is the total amount of revenue generated by a business during the calculation period.

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2
Q

Why is sales turnover useful?

A

It’s useful for tracking sales levels on a trend line through multiple measurement periods, in order to spot meaningful changes in activity levels.

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3
Q

What is the calculation period for sales turnover?

A

The calculation period is usually one year.

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4
Q

What are cost of goods sold?

A

Cost of goods sold are the direct costs attributable to the production of the goods sold by a company.

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5
Q

How do you work out cost of goods sold?

A

beginning inventory + inventory purchases and expenses - ending inventory = cost of sales.

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6
Q

What is opening stock?

A

The amount of goods that are in stock at the beginning of a particular period of time.

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7
Q

What is closing stock?

A

Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period.

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8
Q

List three examples of closing stock.

A

Raw materials, work-in-process, and finished goods inventory.

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9
Q

What is gross profit?

A

Gross profit is the money left once the cost of sales is taken away from the revenues.

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10
Q

What does gross profit tell you?

A

Gross profit tells you how much money a business has made before expenses like salaries and rent are taken away.

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11
Q

Is gross profit positive or negative?

A

Gross profit can be either positive or negative.

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12
Q

What happens if you have positive gross profit?

A

The larger the gross profit, the greater the chance of a positive net profit. However positive gross profit doesn’t always mean that the net profit will be positive.

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13
Q

What happens if you have negative gross profit?

A

If the gross profit is negative, there is nothing left to deduct overheads from. This means there will be no chance of the business making a net profit.

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14
Q

What is cost of sales?

A

Cost of sales is the cost of producing a product. It is the total of all the direct costs like stock, raw materials and labour.

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15
Q

What do financial statements measure?

A

Businesses measure their success with financial statements.

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16
Q

What are financial statements used for?

A

Financial statements record what a business is doing with its money.

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17
Q

Do you have to keep financial statements?

A

Sometimes businesses have to keep financial statements by law.

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18
Q

List two types of financial statements

A
  • An income statement (also known as profit and loss account)
  • A statement of financial position (also known as a balance sheet)
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19
Q

What do income statements do?

A

Income statements show how much money a business has made.

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20
Q

What are direct costs?

A

A direct cost is a cost that can be clearly associated with specific activities or products.

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21
Q

What are indirect costs?

A

Costs that are not directly accountable to a cost object. They can be fixed or variable.

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22
Q

List three examples of indirect costs

A

Administration, personnel and security costs.

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23
Q

What are fixed costs?

A

Business costs, such as rent, that are constant whatever the amount of goods produced.

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24
Q

What is the definition of variable costs?

A

A cost that varies with the level of output.

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25
What is the definition of running costs?
Amount of money that is regularly spent on things.
26
List four examples of running costs
Salaries, heating, lighting, and rent.
27
What are start up costs?
Non-recurring costs associated with setting up a business.
28
List three other names for start up costs
Start-up expenses, preliminary expenses, or pre-opening expenses.
29
What is the formula for sales revenue?
Price x quantity
30
What is the formula for profit?
Total revenue - total costs
31
Name 4 types of indirect costs
``` A particular: Project Facility Function Product ```
32
Name 5 types of start-up costs
``` Accountant's fees Legal fees Advertising Promotional activities Employee training ```
33
What is profit?
A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.
34
What is the formula for gross profit?
Sales (revenue) - cost of sales
35
What is the formula for net profit?
Gross profit - expenses
36
How do you calculate net cash flow for each month in a cash flow forecast?
Inflow - Outflow
37
What is the definition for variable costs?
A cost that varies with the level of output - It's not set.
38
What is the formula for total costs?
Variable Costs + Fixed Costs
39
What is net profit?
The actual profit after working expenses not included in the calculation of gross profit have been paid.
40
What is the break even point?
Break even point is the point when a business hasn't made a profit or a loss.
41
List an example of inflow on a cash-flow forecast
Sales
42
List an example of outflow on a cash-flow forecast
Wages, rent, advertising
43
List two examples of variable costs for a print shop
Ink, paper
44
What is the margin of safety?
How much output or sales level can fall before a business reaches its break even point.
45
What is the total revenue?
The total receipts from sales of a given quantity of goods or services. It is also the total income of a business.
46
What is the formula for total costs?
Quantity of goods sold x the price of the goods.
47
What is the definition of total costs?
Total cost refers to the total expense incurred in reaching a particular level of output.
48
List two benefits of break even
Helps entrepreneur understand the level of risk involved in a start-up. Focuses entrepreneur on how long it will take before a start-up reaches profitability.
49
List two limitations of break even
Most businesses sell more than one product, so break-even for the business becomes harder to calculate. Sales are unlikely to be the same as output – there may be some build up of stocks or wasted output too.
50
What is a cash-flow forecast?
It is a key aspect of financial management of a business, planning its future cash requirements to avoid a crisis of liquidity.
51
What is the definition of inflow?
Money received by an organization as a result of its operating activities, investment activities, and financing activities.
52
What is the definition of outflow?
Money paid out by an organization as a result of its operating activities, investment activities, and financing activities.
53
What is net cash flow?
Net cash flow refers to the difference between a company's cash inflows and outflows in a given period.
54
What is net cash flow in the strictest sense?
In the strictest sense, net cash flow refers to the change in a company's cash balance as detailed on its cash flow statement.
55
What is the definition of opening balance?
The opening balance is the first entry in a firm's accounts, either when they are first starting up or at the start of a new financial year.
56
What is the definition of closing balance?
A closing balance is the amount remaining in an account within your chart of accounts, positive or negative, at the end of an accounting period or year end.
57
Why is cash flow forecasting important?
It is important because if a business runs out of cash and is not able to obtain new finance, it will become insolvent.
58
Where can you find the opening balance?
The opening balance can be found on the credit or debit side of the ledger, depending on whether or not the firm has a positive or negative balance.
59
List 4 examples of inflow
Sale of products Interest on savings Sale of assets, such as old machinery Borrowed money, such as loans
60
Are inflows regular or irregular?
Inflows can be regular or irregular.
61
What are regular inflows?
Regular inflows are money that a business receives on a regular basis, such as monthly sales or annual interest.
62
When do irregular inflows happen?
Irregular inflows, like loans or the sale of assets, don't happen all the time.
63
List 4 examples of outflow
Payments for stock or raw materials Payment for equipment Wages and bills Loan repayments
64
Are cash outflows regular or irregular?
Cash outflows can be both regular or irregular
65
Are regular outflows predictable?
Regular outflows can be predicted
66
List 4 types of regular outflows
Wages Bills Loan repayment Buying stock
67
Are irregular outflows easy to predict?
Irregular outflows, like repairs or news equipment, are harder to predict.
68
How can businesses avoid cash flow problems?
Businesses should set aside money for irregular outflows when making a cash flow forecast to avoid any cash flow problems

Business Studies (10 decks)

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