- 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
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
Break even graph advantage and disadvantages
- Helps you to see how much loss or profit you could make
- Helps you to see if business is realistic enough to setup
- not always accurate as it is a prediction
- They take time
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.
Cash inflow and outflows
- Sales revenue
Cash flow equations
Net cashflow= Income - expenses
Closing balance= Income - expenses + openening balance
Opening Balance= Closing balance from previous month
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 :
- staff wages (employees)
What can be done with profit?
- Train staff
- Better quality supplier
- new machinery
- Pay rise
- Buy buildings
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)
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