Unit 1 revision

Unit 1 revision - LO4 (finance)

Business costs

Opportunity costs - a benefit, profit or other advantage that must be given up to acquire or achieve something else.

Fixed costs are costs that have to be paid even if the business produces nothing. Examples of fixed costs iclude: rent, office wagfes, advertitsing and insurace.

Variable costs are costs that vary directly with the level of output. Output double = variable costs double. Output halves = variable costs also halve. Examples include: raw materials,direct labour and packaging costs. 

Revenue

Revenue (can ofetn be called sales, total revenue or turnover) is the income that a business earns over a period of time. e.g. over a month or a year. Examples include: cash sales, credit sales, interest and dividends. 

formula -> revenue = selling price x quanttity sold

Cash flow

Cash flow is the movement of money into and out of a business.

Cash inflow will include all recipts of money. Example: cash recived from selling products/services, loan receipts, commission received and rent received. 

Cash outflow will include all payments made by the business. Examples include: wages, insurance, payments to suppliers…