3.1
capital needed by an entrepreneur to set up a business
Start-up Capital
costs which cannot be identified with a unit of production or allocated accurately to a cost centre – also known as overhead costs
Indirect Costs
the level of output at which total costs equal total revenue
Break-even
the decline in the estimated value of a fixed asset over time
Depreciation
the ability of a firm to pay its short-term debts
Liquidity
the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers.
Working Capital
total income from the sale of all units of the product = quantity × price
Total Revenue
the amount by which the output level exceeds the break-even level of output
Margin of Safety
items of monetary value that are owned by a business
Assets
(non-current assets + current assets) – current liabilities or non-current liabilities + shareholders’ equity. The total capital invested in the business.
Capital Employed
raised from the business’s own assets or from profits left in the business (ploughed-back or retained profits)
Internal Finance
the income that an organisation gets from a particular activity
Revenue Stream
unit contribution × output =
Total Contribution
a financial obligation of a business that it is required to pay in the future
Liabilities
current assets minus inventories
Liquid Assets
the profit left after all deductions, including dividends, have been made; this is ‘ploughed back’ into the company as a source of finance
Retained Profit
costs that do not vary with output in the short run
Fixed Costs
selling price of a product minus direct costs per unit
Contribution per unit
presenting the accounts of a business in the best possible, or most flattering, way which could potentially mislead users of accounts
Window Dressing
Gross Profit/sales revenue x 100
gross profit margin
individual investors who put in their own money in a variety of businesses and are seeking a better return than they would obtain from conventional investments
Business Angels
the income received from the sale of a product
Revenue
The title of section 3.1
Break Even Analysis
customers who have bought products on credit and will pay cash at an agreed date in the future
Debtors
Liquid assets/current liabilities
Acid Test Ratio