Unit 2 Flashcards
What is Meant by Start-Up Cost
Costs you have when setting up a business e.g. painting, decorating, equipment, fixtures and fittings
What are Operating Costs
Costs you have on a day to day basis with the business-Stock,Wages,Salaries,Rent,Utilities,Broadband
What are Fixed Costs
These cost do not change with output
For example these costs will remain the same if you sell 0 items or 1000 items.
A business has to pay rent on their building each month, regardless of if any customers actually use the business
What are Variable Costs
hese are costs that do change with output
For example if you sell more items, then your cost will increase as a result
If it costs 2p to buy each can of cola from your supplier, then if you sell more cans of cola your costs will start to increase
What are Direct costs
Costs directly related to the production process
What are Indirect Costs
Costs that can not be directly related to the production process
What is the Equation for Total Costs
TOTAL COSTS = FIXED COSTS + VARIABLE COSTS
What is Revenue
A business will generate revenue from the selling of products or services(Selling Price x NO items sold)
What is the Equation for Revenue
Selling Price x NO items sold
What are the 3 types of Revenue
Sales revenue
Interest revenue
Loan revenue
What is Expenditure
anything that the business has to pay out
What are Overhead Costs
the everyday running costs of an organisation
How do you calculate Profit
To calculate profit we need to know the revenue and expenditure of an organization
Profit=Revenue - costs
What is Break Even
The point where a revenue and costs are equal
A new business may view break even as an achievement as it could be difficult to attract new customers at first. It may need to reduce prices to achieve sales
An existing business may view break even as failure, if it has made a profit in previous years. They may have shareholders expecting payment
What does The Breakeven Chart help with
How many items it needs to sell to break even
Predict future profits
Impact change in costs/revenue has
Decisions that may need to be made
Equation For Breakeven
Break even = Fixed costs/(Selling Price - Variable Cost)
What is the impact of on the break even point if
The selling price were to increase
If the selling price were to increase the business should break even quicker as it wont need to sell as many units
What is the impact of on the break even point if
What if variable costs were to increase?
The business would take longer to break even as it would need to sell more units
What is budgeting?
A plan of inflows and outflows in an organization
Expenditure Budget
This is the budget that looks at all the costs
Revenue budget
Money that inflows into the enterprise
Favourable
if you do better than budget
Adverse
worse than budget
Why do you budget?
Purpose
Budgeting allows the enterprise to
Assess how it is performing
Make divisions about performance
Identify areas of weakness
Plan use of finances
What is Budgetary control
This is the process where the actual performance of an organisation are compared to budgeted performance
What Is gross Profit
This is the largest profit that a business makes(Revenue - cost of sales
The profit made from selling a product after the cost of sales has been deducted
What is Net profit
The smaller profit an enterprise makes(Revenue - all costs, Gross profit- expenditure)
The profit made from selling a product after all the costs have been deducted
What are the two things an enterprise can do if they are making a loss at the gross profit stage
Reduce costs of sales
Increase selling price(be mindful of competition)
If an enterprise is making a loss at net profit stage, then it has two options……
Increase gross profit
Reduce overhead costs
What is a Cash Flow Forecast
This is a prediction of the inflows and outflows of money in an organisation
What are 3 examples of inflows
Sales revenue
Personal Savings
Interest
Bank loans are also inflow but are bad as you must pay interest
What are 3 examples of outflows
Purchases
Wages
Bills
Loan repayments
What happens if a business has too many costs
If the business has to many costs then the cash flow level will drop, potentially causing a liquidity problem
What are the two potential ways to solve a cash flow problem
Increase selling price/ Sales revenue
Reduce Costs(Fixed or variable)
Why are bank loans not a potential way to solve a cash flow problem
bank loans is not a solution as you just pay interest
What are the Benefits of cash flow forecast
Plan future investment in new resources
Make decisions new products/services
Plan for future borrowing requirements
Plan for changes in capacity
What is meant by Credit sales
Some businesses will give their customers credit. This means that they don’t have to pay immediately for their items
Overall what does a cash flow forecast ensure?
A enterprise can plan for future borrowing
A business can adjust future spending
Invest any surplus money
What are assets
Assets are what you own
What are liabilities
Liabilities are what you owe
What are some examples of Assets
Stock
Cash
Trade receivables(Debtors
Machinery
Buildings
Reputation
What ar some examples of liabilities
Creditors
Bank Loan
OverDraft(Short term loan)
What are the 4 P’s
Price
Place
Product
Promotion
What is the promotional Mix
This is an aspect of the marketing mix and describes the blend of promotional activities that an organisation can undertake to achieve its promotional goals
What is advertising
The use of paid for space to communicate products in prime media with the purpose to persuade and inform
Name examples of moving image advertising
Tv, Cinema, DVD, Youtube
Name examples of Print advertising
Newspaper, Billboards,Magazines,Direct Mail,Press releases
Name examples of ambient advertising
Promotional merchandise, buses, taxis, Trains
Name examples of digital advertising
SMS, Podcasts, blogs, Banners, Social Media
Name examples of audio advertising
Radio, Podcasts
What does a sales promotion do
This provides incentives to the customer with the purpose of stimulating demand for a product or service
List examples of Price promotion
Coupons
Competitions
Money refunds
Loyalty Incentives
What is meant by Personal Selling
This is the interpersonal interaction between the organisation and the customer to bring about a sale. Typically this is done by the sales functional area
List examples of personal selling
Face to face
Telephone
Email
Video/Web conferencing
What is meant by
Public Relations
This is the promotion of an organisation or brand through placing information in the media without paying for the time or media space directly
Name examples of PR
Press releases
Sponsorship
Exhibitions
What is meant by Direct Marketing
This is the building of a relationship on an individual level between the business and customer
List examples of Direct Marketing
Direct Mail (Junk Mail)
Mail Order Catalogues
Telemarketing
What is meant by Brand personality
The characteristics or qualities that a consumer can relate to a specific brand
