An aim is where the business wants to go in the future, its goals. It is a statement of purpose, e.g. we want to grow the business into Europe.
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What is break even?
The level of output where total costs and total revenue are exactly the same. Neither profit nor loss is being made. Break even = fixed cost/contribution
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What is a break even chart?
A graph which shows total costs and total revenue. The break even point is where the total cost and total revenue lines cross.
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What is a break even chart?
The stated, measurable targets of how to achieve business aims.
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What is cash flow?
The flow of money coming in and out of a business.
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What is cash flow forecast?
The prediction of all expected receipts and expenses of a business over a future time period which shows the expected cash balance at the end of each month
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What are cash inflows?
The flow of money into a business e.g. from sales of products, bank loans or other injections of cash
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What are cash inflows?
Expenses that must be met when setting up and running a business
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What are fixed costs?
Costs which do not vary even if the level of output changes
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What is internal finance?
A source of finance from within the business (retained profit, working capital, sale of assets)
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What is leasing?
Renting or hiring equipment or property
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What are long term sources of finance?
Sources which involve larger sums of finance. They typically finance start-up and expansion costs and are usually repayable over many years
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What is margin of safety?
The amount of output available to be sold above the break even point where the business makes a profit.
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What is a mortgage?
A long term loan which uses property as security
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What is net cash flow and its formula?
The difference between cash inflow and cash outflow in a particular time period. Net cash flow = cash inflows - cash outflows.
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What is profit?
The difference between total revenue and total cost for a given period.
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What are the disadvantages of break-even analysis?
Break-even analysis is only a forecast and variable costs can increase or decrease as the business grows or the season changes. Break even analysis does not take several products into account. Sales are not always the same as output.
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What are the advantages of break-even analysis?
It allows a business to see how much needs to be sold to avoid losses. It allows a business to decide whether to reduce costs or increase prices based on this. It calculates the margin of safety.
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What are receipts?
The money coming into the business.
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What are payments?
The money being spent by the business.
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What is the opening balance?
The money that the business already has.
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What is the closing balance?
Opening balance + net cash flow
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What is net cash flow?
Total receipts - payments
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What is interest?
Total repayment - borrowed amount / borrowed amount x 100
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What are short-term sources of finance?
These sources of finance are usually repaid in under a year. These can be overdrafts, trade credit, hire purchase and leasing.
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What are long-term sources of finance?
These sources of finance are usually repaid in over three years. These can be personal savings, venture capital, share capital, loans and retained profit.
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What are internal sources of finance?
A source of finance from within the business (retained profit, working capital, sale of assets.
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What are external sources of finance?
A source of finance from outside of the business (loans, mortgages, crowd funding)
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What could be a business' financial aims and objectives?
To ensure the business survives, to grow profit, to grow sales, to increase market share and to be financially secure.
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What could be a business' non-financial aims and objectives?
Social objectives, to gain a feeling of personal satisfaction, to challenge yourself, to gain independence and to gain control
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Why do aims and objectives differ between businesses?
A small business may focus more on survival and not getting a loss whilst a larger business may focus on increasing market share and profits as well as generating maximum sales.
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Other cards in this set
Card 2
Front
What is break even?
Back
The level of output where total costs and total revenue are exactly the same. Neither profit nor loss is being made. Break even = fixed cost/contribution
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