- Created by: jessicahh
- Created on: 21-06-18 08:45
BUSINESS STUDIES REVISION CARDS
REVISE THESE NOTES REGULARLY.
FIXED COSTS - costs that DO NOT change with output
VARIABLE COSTS - costs that DO change with output
START UP COSTS - costs that MUST be paid before a business starts up
RUNNING COSTS - costs that you MUST pay daily
TOTAL COSTS - FIXED COSTS + VARIABLE COSTS
INDIRECT COSTS (OVERHEADS) - costs that ARE NOT directly involved with the production process
DIRECT COSTS (COGS) - costs that ARE directly involved with the production process
REVENUE - number of sales x price per unit
REVENUE EXPENDITURE - money spent on an indivual business' day to day costs
CAPITAL EXPENDITURE - money spent on long term assets
PROFIT - Total Revenue - Total Costs= TR>TC
LOSS - TR<TC; if TR=TC then the business is in breakeven
BREAK EVEN POINT OF SALE is where TR(PxQ) = TC (FCxVC)
BREAK EVEN FORMULA - Fixed Costs/(Price per unit - VC per unit)
MARGIN OF SAFETY - amount of sales above the BeP of sale which a business experiences
THE BeP OF SALE GRAPH - a graph to show how the BeP of sale can be calculated and offers a visual representation of profit, loss or breakeven
CASHFLOW - the amount of cash flowing in and out of a business each month
TOTAL INFLOWS - all the cash flowing into a business ie. sales revenue, loans
TOTAL OUTFLOWS - all the cash flowing out of a business ie. supplier costs, loan repayments
NET INFLOWS - Total Inflows - Total Outflows
OPENING BALANCE - The money left brought over from the month before (could be negative)
CLOSING BALANCE - Cash Flow + Opening Balance
- It shows when a business is making enough money to cover all their costs.
- It is needed to know how much to sell to enable the business to make a profit.
- To identify and track costs (fixed and variable)
- It can help businesses identify where they can change their costs, for example, buying cheaper materials or finding a cheaper supplier.
- It is needed to highlight the margin of safety.
- It is only as accurate as the forecasts of costs and prices.
- It assumes all outputs are sold. In reality, this is unlikely.
- It is difficult to use with more than one product.
GROSS PROFIT - Revenue - Costs of Sales (COGS)
NET PROFIT - Gross Profit - Indirect costs
FIXED ASSETS - Assets which are needed for a business to trade
CURRENT ASSETS - Assets which are easily converted into cash
DEBTORS - Customers who owe the business money
CREDITORS - People who the business owes money to
WORKING CAPITAL - Current Assets -Current Liabilities (Net Current Assets)
TOTAL ASSETS - Fixed assets +current assets
NET ASSETS - Total assets - current liabilities
LONG TERM LIABILITIES - things like bank loans
CAPITAL EMPLOYED - all capital ie. bank loans and share capital (must balance with net assets)