# topic f key terms

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Profit of loss equation
Profit (or loss) = income - costs
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break even
occurs when income - costs = zero
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costs equation
costs = income-profit
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income equation
Income = costs + profit
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Predict
To attempt to say in advance that something will
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Budget forecast
(in business) A budget forecast is an attempt to predict what might happen in the future in terms of money into a business and money out of a business
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Profit
If revenue or income is greater than costs then a business will make a profit
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Loss
If cost are greater than revenue or income then a business will make a loss
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Terrace
A continuous row of similar houses joined together
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Disband
To break up and stop operating. Usually applies to a club or some other organisation
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Tenancy agreement
A document that states the terms and rental price for the use of a building or room
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Cash Flow Forecast
A set of predictions on what might happen in terms of finance in business
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Cash Flow Statement
A set of figures showing what has happened in terms of finance in a business
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Anticipate
Attempt to predict what may happen so that you are prepared to take action
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Finance manager
The person in a business who has responsibility for financial matters
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Financial Data
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Variable costs
costs which change as the number of units (or items) produced changes
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Fixed cost
Cost which stay the same as the number of units (or items) produced changes
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Total costs equation
Total costs = Fixed costs + variable costs
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Total costs
(in simple terms) all the cost a business faces, including both fixed and variable costs
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Sales revenue equation
Sales revenue = the price of the product x the number of units sold
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Sales revenue
(in simple terms) the amount of money a business receives from the sale of its products
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break even point
the point where sales revenue is equal to costs. neither a profit nor a loss is made
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Break even number of sales
the total number of products SOLD when sales revenue is equal to costs
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Break even output
The total number of products MADE when sales revenue is equal to costs
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Break even sales (or output) equation
Break even sales = fixed costs/(price per unit - variable cost per unit)
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Per unit
This means "for each individual item or product"
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Gross profit
The profit a business 'makes' on the sale of goods (made or bought in) or services
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Sales revenue (sales turnover)
this is the money that comes into the business from the sale of goods or services
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Costs of sales (cost of goods sold)
this is the money the business spent on the items that it has sold
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Gross profit equation
Gross profit = sales revenue - cost of sales
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loss on sales
the loss a business 'makes' on the sale of goods (made or bought in) or service
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opening stock
The stock of items (to sell) a business has at the beginning of the financial year, valued at the price at which the business bought them
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purchases
The amount of money spent during the year buying items (to sell)
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Closing stock
The stock of items (to sell) a business has left at the end of the financial year, valued at the price at which the business bought them
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Cost of sales equation
Cost of sales = opening stock + purchases - closing stock
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Net profit (or loss)
The profit (or loss) a business 'makes' after taking into account non sales revenues and expenses
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Expenses (running costs)
the money the business has spent on items other than the goods and services that it sold
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Depreciation
The term given to the "wearing out" of any major asset a business owns, for example a van or piece of machinery. It is included as an operation cost to the business.
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Net profit equation
Net profit = gross profit + non sales revenues = expenses
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Retained profit
Profit kept back by the business for future use, perhaps for spending capital equipment
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Corporation tax
A tax on profit, paid to the government by companies
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The complete profit and loss account
A financial statement which considers the profit (or loss) a business makes over a period of time, usually one year
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The part of the profit and loss account which considers gross profit
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The profit and loss account
The part of the profit and loss account which considers net profit
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The appropriation account
The part of the profit and loss account which considers the division of net profit
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assets
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liabilities
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Capital (worth) of the business equation
Capital = assets - liabilities
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Balance sheet
a document drawn up to show the assets, liabilities and worth of a business
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Fixed assets
Assets for use in the operation of the business. they usually last a long time.
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Tangible fixed assets
assets that can be physically touched
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Intangible fixed assets
assets that cannot be physically touched
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Currents assets
Assets that are either cash or are primarily in the business to be turned into cash
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Stocks
Items a business owns that are intended for sale or manufacture
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Debtors
customers who owe a business money
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business that owe money to another business for good they have brought from it
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Currents liabilities
Part of what a business owes. These usually have to be paid within one year
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Creditors
What a business owes for items it has bought
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What a business owes for items it has bought from other business
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Short term debts
debts which usually has to be paid back within one year
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Overdraft
A facility to take out more money than is in one's bank account. interest is usually charged
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Working capital equation
Working capital = current assets - current liabilities
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Long term liabilities
Part of what a business owes. these usually have to be paid back over a period greater than one year
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A loan given, usually by a bank or building society, to a business
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Reserves
Part of a businesses profits, kept back each year to fund investments
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Gross profit to sales revenue equation
Gross profit o sales revenue = (gross profit/sales revenue) X 100
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Net profit to sales revenue equation
Net profit to sales revenue = (net profit/sales revenue) X 100
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## Other cards in this set

### Card 2

break even

#### Back

occurs when income - costs = zero

costs equation

income equation

Predict