topic 1.3 putting a business idea into practice Flashcards
what are financial objectives
-survival
-profut
-wealth
-income
-financial security
what are non financial objectives
-personal satisfaction
-challenge
-independence
-control
-helping others
profit formula
sales revenue-total cost
sales revenue formula
selling price x sales volume
total costs formula
fixed cost + variable cost
variable cost formula
cost per unit x sales volume
interest formula
total repayment- borrowed amount divided by borrowed amount x 100
break even point
level of output where total revenues are equal to total costs, niether a profit or loss is made
break even point formula
fixed costs / sales price - variable cost per unit
margin of safety
how much sales can fall before business break even point is reached again
what happens to the break even pint if:
a) costs go up
B) sale price goes up
a) it becomes larger (further along the chart)
b) it becomes smaller (closer on the chart)
what is cash flow
movement of money into and out of the business, cash is used to pay the day-to-day expenses of a business
why is cash flow important to a business
-to pay its expenses (suppliers, overheads, employees ect.)
-to prevent business failure (insolvency)
how is net cash flow calculated
total cash flow in-total cash flow out
differences between long term and short term sources of finance
LT: sources of money for business that are borrowed or invested typically for more thna a year
ST:sources of money for a buisness that may have to be repaid less than a year, e.g. overdraft
