Business revision cards

  • Created by: adwoa1
  • Created on: 30-10-19 18:18

Revision and cost equations

Revenue= Price x Number sold

Variable= Cost x no.sold

Total cost= Fixed + variable

Profit= Revenue - cost

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Revenue and cost defenitions

Fixed cost- Do not change based on sales.

Variable cost- These do change based on sales.

cost- money going out.

Revenue- Money going in.

Profit- Money that is earned in a business after paying the cost of selling and producing goods.

Margin of safety- The amount that a business's current level of production exceeds its break even level of output

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Fixed costs

Fixed cost:

  • Rent
  • Uniform
  • Storage
  • salary
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Variable cost

Variable cost:

  • equipment
  • utilities
  • wages
  • Ingredients
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Break even graph advantage and disadvantages

Advantages

  • Helps you to see how much loss or profit you could make
  • Helps you to see if business is realistic enough to setup

Disadvantages

  • not always accurate as it is a prediction
  • They take time
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Cash flow forecast

opening Balance- The amount of money in the business bank account at the start of the period (start with)

Income per period- The amount of money expected in the bank account in that month (money coming in)

Expenditure per period- The amount expected to leave the bank account in that month (Money going out)

Closing Balance- Amount expected in the bank account at the end of the period (The money at the end)

Cash flow- movement of money in and out of the business bank account.

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Cash inflow and outflows

Inflow

  • Sales revenue
  • Capital
  • Loans
  • Grants

Outflow

  • Wages
  • Rent
  • Advertising
  • Stock
  • Purchases
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Cash flow equations

Net cashflow= Income -  expenses

Closing balance= Income - expenses + openening balance

Opening Balance= Closing balance from previous month

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Profit and loss account

Calculates the profit and loss made by a business in the last 12 months

Profit= Revenue - costs

Gross profit= revenue - cost of goods sold

Net profit= Gross profit - expenses

COGS= cost directly related to making a product :

  • Ingredients
  • staff wages (employees)
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What can be done with profit?

Partnership:

  • Expand
  • Train staff
  • Better quality supplier
  • new machinery
  • Pay rise
  • rennovate
  • Buy buildings
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Balance sheets

Assets  - what a business owns

Liabilities - what a business owes (its debts)

Current assets - somethhing you own ( cash or can easily be turned into cash )

Non current assets - something you own ( lasts a long time in the business )

Non current liabilities - a debt/something you owe ( pay up in over a year)

Current liabilities - a debt/somethong you owe (pay up to within a year)

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Balance sheet equations/ formulas

Debtor - (reiceivables) - sombody whos owes you money

Trade credit- (payables) -supplier you owe money to

Net current assets (working capital)= current assets - current liabilities

Net assets= Total assets - current liabilities

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