Topic 1.3 - Putting a business idea into practice Flashcards
1.3.1
Give 5 financial aims and objectives of a company when starting up
- survival
- profit
- sales
- market share
- financial security
1.3.1
Give 5 non-financial aims and objectives of a company when starting up
- social objectives
- personal satisfaction
- challenge
- independence
- control
1.3.1
What is a business aim?
An overall long-term target or goal of the business.
1.3.1
What is a business objective?
A short-term step a business needs to take to meet its overall aims.
1.3.2
What is revenue? (and formula)
The total income of the business
Revenue = quantity x price
1.3.2
What are fixed costs?
Costs which do not vary with the amount that the business outputs
1.3.2
What are variable costs? (and formula)
Costs which change as output changes. It increases when output increases and decreases when output decreases.
Total Variable Costs = Cost Per Unit x Total Number of Units
Output
A quantity of goods or services produced in a specific time period
1.3.2
What is the Total Cost? (and formula)
The sum of all the costs of a business.
Total Cost = Fixed Cost + Variable Cost
1.3.2
What does it mean if a company has profit? (and formula)
When a company has more revenue than total costs
Profit = Revenue - Total Cost
1.3.3
What does it mean if a company has loss?
The revenue of the company is less than the total cost.
1.3.3
What is an interest rate? (and formula)
An interest rate is the cost of borrowing money.
Interest Rate = (total repayment - borrowed amount)/borrowed amount
1.3.2
What is the break even level of output? (and formula)
The point where the revenue of the business is equal to the total cost.
Breakeven = total fixed cost/(selling price - cost per unit(CPU))
1.3.2
What is the margin of safety? (formula)
the amount sales can fall from the actual output before the output required at the break-even point (BEP) is reached and the business makes no profit
margin fo safety = goal (last number in x axis usually) - breakeven
1.3.3
Why is cash important to a business? (2 points)
● to pay suppliers, overheads and employees
● to prevent business failure (insolvency)
Cash
The asset that the business hold which allows it to buy supplies and pay wages
1.3.3
What is net cash flow? (and formula)
The difference between the cash coming into the business and the cash flowing out of the business
Net Cash Flow = Receipts - Payments
1.3.3
What is a business’s opening balance?
The opening balance is the amount of money a business starts with at the beginning of the reporting period.
1.3.3
What is a closing balance?
The closing balance is the amount of money a business has at the end of the reporting period
1.3.4
Give 2 short-term sources of finance for a small business.
- overdrafts
- trade credits