Business - Financing

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Revenue (definition)
The value of total sales made by a business within a period (1year usually)
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Costs (definition)
The expenses incurred by a firm in producing and selling its products (e.g. wages and raw materials)
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Profit (definition)
The difference that arises when a firm's sales revenue exceeds its total costs
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What do COSTS include?
Start up, fixed and variable costs
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What does REVENUE include?
Sales, leasing, interest
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What does PROFIT include?
Gross and net profit
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Equation of revenue, cost and profit
Revenue - Costs = Profit
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What increases profit?
Lower wages, cheaper manufactorers,sell more at lower price, increase advertising, improve product quality
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REVENUE (formula)
SALE PRICE X NUMBER OF UNITS SOLD
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PROFIT(formula)
REVENUE - COSTS
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TOTAL COSTS (formula)
FIXED COSTS + VARIABLE COSTS
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FIXED COSTS (definition)
Expenses that do not change as a function of the activity of a business, within revelant period (e.g. rent, utility bills, which are irrespective of sales)
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VARIABLE COSTS (definition)
Periodic costs, varies in step with the output or the sales revenue of a company (e.g. raw materials, energy usage, labor)
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What is the importance of profit?
Provide a measure of sucess, best source of capital for investment in the growth of the business and act as a magnet to attact further investment
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Examples of cost of sales?
E.g. retailer - amount paid for stock. E.g. manufacturer -amount paid for raw materials, components and factory workers wages
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What are expenses?
Costs that bussinesses have to meet, e.g. rent and rates, power, advertising, insurance and telephone
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What 2 steps are used to calculate profit?
Step 1 - Gross Profit, Step 2 - Net Profit
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What is Gross Profit?
An inital profit on the product we are selling, before deducting general expenses such as power
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GROSS PROFIT (formual)
GROSS PROFIT = SALE - COST OF SALES
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What is Net Profit?
Profit after the expenses
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NET PROFIT (formula)
NET PROFIT = GROSS PROFIT - EXPENSES
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What is an ENTERPRISE?
SKILLS AND ATTITUDES = new ideas, new products, new services (nothing to do with business)
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Examples of the characteristics of the skills and attitudes in an enterprise?
Determination, willing to take risks, build relationships, ambitous, confident, teamworker/leader
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ENTREPRENEUR (definition)
A perosn who makes an idea happen through taking risks in order to maximise rewards for his/her business
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Why to become an entrepreneur?
Control over working life, make money, make a difference, second career, spotter an opportunity, made redundant
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KEY FACTORS TO SUCESS?
Unique selling point, adding value, finacially supported, passionate, out going
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Other cards in this set

Card 2

Front

Costs (definition)

Back

The expenses incurred by a firm in producing and selling its products (e.g. wages and raw materials)

Card 3

Front

Profit (definition)

Back

Preview of the front of card 3

Card 4

Front

What do COSTS include?

Back

Preview of the front of card 4

Card 5

Front

What does REVENUE include?

Back

Preview of the front of card 5
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