Economics Theme 1.6 0.0 / 5 ? EconomicsMarket failureA2/A-levelEdexcel Created by: manisharandhawa1Created on: 05-01-18 16:26 Profit Sales Revenue-Total Costs= Positive Value i.e Revenue>Total Costs 1 of 22 Loss Sales revenue-Total costs=minus value i.e sales revenue 2 of 22 Sales Volume This is how much the firm sells in terms of the number of items 3 of 22 Sales revenue This is the money received from selling the units 4 of 22 Capital costs These are spending on assets that bring long term benefits 5 of 22 Operating Costs These are spending on items to keep the business operating 6 of 22 Fixed Costs These are not altered by the amount a firm produces &/or sells i.e they are not linked to output 7 of 22 Variable Costs These do alter with the amount a firm produces &/or sells i.e linked to output 8 of 22 Contribution formula Used to work out the contribution made by the revenue after each unit after paying the variable cost 9 of 22 Break Even The level of output at which neither a profit or a loss is made 10 of 22 Margin of Safety margin of safety is how much output or sales level can fall before a business reaches its breakeven point. 11 of 22 Gross Profit This is the revenue (money coming into the business) minus the cost of the goods sold (cost of making the goods) 12 of 22 Operating Profit This is the gross profit which is the revenue minus the cost of making the goods, minus the expenses (fixed costs) 13 of 22 Profit of the Year (Net profit) This is the operating profit (this is the gross profit minus the expenses (fixed costs)) minus the interest and taxation. 14 of 22 Gross Profit Margin This is the financial ratio that compares the gross profit with the firm's sales 15 of 22 Operating Profit Margin This is the financial ratio that compares the operating profit with the firm's sales 16 of 22 Profit for the year margin This is the ratio that compares the profit for the year with the firms sales 17 of 22 Forecast Predicting the timings of cash coming into and going out of the business 18 of 22 Cash flow This can be described as the inflow and outflow of the business and is necessary for daily operations 19 of 22 Cash flow forecasting This is a plan that shows how much money a business expects to receive in, and pay out, over a given period of time. 20 of 22 Cash inflow Money received by an organisation as a result of its operating activities, investment activities and financing activities 21 of 22 Cash outflow Money paid out by an organization as a result of its operating activities, investment activities and financing activities 22 of 22
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