Business

What is breakeven?

The breakeven point is when the total revenue reaches the exactly the same ammount as the total costs and the business is neither making a loss or a profit. The breakeven can be calculated by drawing graph showing how fixed costs, variable costs, total costs and total revenue change with the level of output.

Breakeven =      Fixed costs /Selling price per unit – Variable cost per unit 

Usefull notes

• If you change the price you sell at the breakeven point will change.
• The Breakeven Formula tells you how many units you need to sell at that price to breakeven.

 The labbles that need using for a breakeven chart are as follows: 

 Total costs, Profit Overheads, Break-even, point Margin of Safety, Revenue, Fixed costs, Total sales, Loss, Variable costs, Expenditure Price per unit.

COSTS

Costs are anything which cost businesses money/things they have to pay for. 

Differnt types of costs

• Start-up costs are costs that need to be paid when setting up a new business 
• Operating costs are running costs that businesses have to pay regularly when running the business.
• Fixed costs are the same no matter how much of the product a business makes (or even if they don’t make any at all)
• Variable costs will be higher if the business makes more of their product and lower if they make less
• Fixed costs are also called indirect costs in some cases
• Variable costs are also called direct costs in some cases.
• Total costs can be worked out by adding up all the costs involved in a period of time 

total costs

Total costs = fixed costs + variable costs

• Budgets predict how much money a business is going to spend,
• Budgets also predict how much money a business will recieve.
• Budgets also account for any money a business saves or borrows

Expendature budgets

cash flows into the business as receipts - eg from cash received from selling products or from loans

cash flows out of the business as payments- eg pays wage, supplies and intrest on loans.

Profit and cash flow are two very different things. Cash flow is simply about money coming and going from the business. Managers need to make sure there always is enough cash to pay the expenses, otherwise it will risk the survival of the business.

Conclusion- Basically what cashflow is is the money coming in and out of a business.

[revise this alot]

• A trading, profit and loss account shows the business's financial performance over a given time period, eg one year.
• The trading account shows the business has made a gross profit of £30,000 before taking into account other expenses such as overheads.
• https://www.google.co.uk/search?q=financial+records&espv=2&source=lnms&tbm=isch&sa=X&ved=0ahUKEwi72-2B__bSAhVqL8AKHZ6OA3wQ_AUIBigB&biw=1366&bih=613#tbm=isch&q=financial+records+business+revision&*&imgrc=6J9_hi-2Tbj0FM: - for example of fiancial record

Balcence sheets

A balance sheet shows the value of a business on a particular date. A balance sheet shows what the business owns and owes (its assets and its liabilities).