Business - Unit 5: Finance - 5.3

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  • 5.3 - Revenue, costs, profit and loss
    • Revenue
      • Money coming into a business from sales of products/ services
      • Revenue = price x quantity sold
        • R = P Q
    • Total costs
      • Payments that a business makes in order to make products and services
      • Total costs = fixed costs + variable costs
        • TC = FC + VC
    • Fixed costs
      • Costs that do not change depending on output
        • e.g. rent, salary, interest repayments
    • Variable costs
      • Costs that change depending on output
        • e.g. packaging /materials
      • Variable costs = quantity sold x variable cost per unit
    • Gross profit
      • Profit made because of revenue, not including overhead expenses
      • Gross profit = revenue - cost of sales
    • Net profit
      • Profit made because of revenue, including overhead expenses
    • Gross profit margin
      • The % of revenue that is gross profit
      • Gross profit margin = gross profit/ revenue x 100
    • Net profit margin
      • The % of revenue that is net profit
      • Net profit margin = net profit/ sales revenue x 100
    • ARR
      • The amount of finance received on average over the lifetime of an investment
        • ([total income - cost of investment] / no of years) / cost of investment x 100
          • ARR
            • The amount of finance received on average over the lifetime of an investment
              • ([total income - cost of investment] / no of years) / cost of investment x 100

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