Business Studies

Debt Factoring 

a business sells it's debt to a debt facotry, they give 80-90% upfront, the rest is given once it's been collected from the debtors minus a small fee. 

Advantages 

• improves cashflow 
• reduces hassle of chasing payment 

Disadvantages 

• Not good for overall profit
• reduces revenue received from sales 

MARGIN OF SAFETY 

Actual level of output - breakeven output 

A larger margin of safety is better since the business' sales have to decrease further in order to make a loss. 

FACTORS

• selling price - increases, break even point decreases making margin of safety larger 
• variable cost- increases, break even point increases making margin of safety smaller
• Fixed cost- increases, break even point increases making margin of safety smaller