Topic 1.3 Flashcards
Business Aims:
a general statement of where you’re heading
Objectives:
a clear, measurable goal, so success or failure is clear to see. Financial - Profit, sales, market share, financial security | Non - financial - challenge, personal satisfaction , independence.
Market share:
the percentage of a market held by one company or brand
Fixed costs:
costs that don’t vary just because output varies, for example rent/ mortgage and manager’s salaries.
Variable costs:
costs that vary as output varies, such as raw materials, wages
Profit:
the difference between revenue and total costs; if the figure is negative the business is making a loss.
Revenue:
the total value of the sales made within a set period of time, such as a month.
Interest:
Interest: the charges made by banks for the cash they have lent to a business, for example six per cent per year.
Total costs:
all the costs for a set period of time, such as a month.
Break-even:
the level of sales at which total costs are equal to total revenue. At this point the business is making neither a profit nor a
loss.
Break-even chart:
a graph showing a company’s revenue and total costs at all possible levels of output.
Margin of safety:
the amount by which demand can fall before the business starts making losses.
Cash:
the money the firm holds in notes and coins, and in its bank accounts.
Cash flow:
the movement of money into and out of the firm’s bank account.
Insolvency:
when a business lacks the cash to pay its debts.
Bankrupt:
when an individual lacks the cash to pay its debts.
Overdraft:
the amount of the agreed overdraft facility that the business uses.
Overdraft facility:
an agreed maximum level of overdraft.
Cash flow forecast:
estimating the likely flows of cash over the coming months and, therefore, the overall state of one’s bank balance.
Closing balance:
the amount of cash left in the bank at the end of the month.
Opening balance:
the amount of cash in the bank at the start of the month.
Net cash flow:
cash in minus cash out over the course of a month.
Negative cash flow:
when cash outflows are greater than cash inflows.
Crowdfunding:
raising capital online from many small investors (but not through the stock market).
Dividends:
payments made to shareholders from the company’s yearly profits. The directors of the company decide how large a dividend payment to make; in a bad year they can decide on zero.
Retained profit:
profit kept within the business (not paid out in dividends); this is the best source of finance for expansion.
Share capital:
raising finance by selling part-ownership in the business. Shareholders have the right to question the directors and to
receive part of the yearly profits.
Trade credit:
when a supplier provides goods but is willing to wait to be paid – for
perhaps up to three months. This helps with cash flow.
Venture capital:
a combination of share capital and loan capital, provided by an investor willing to take a chance on the success of a small to
medium-sized business.
