BASIC FINANCE
fixed costs
costs that do not change with output
profit calculation
revenue- expenditure
Define breakeven
When you make no profit and no loss
An example of an outflow for a business
purchasing materials
wages
What is another term for a statement of financial positioning
Balance sheet
Example of start up cost
Equipment
Building
Van
Define revenue
Money you make from sales
What does a break even chart show you
The amount of units you need to sell before you start making profit
An example of an inflow for a business
Money made from sales
Loan
What does an income statement show?
Profit and loss over a year normally
Another term for running cost
Operating cost
A business makes £250 in revenue. It costs them £120 to make the product etc. What is the profit made?
£180
What is the margin of safety?
The number of sales you can drop before you start making a loss
Why use a cash flow forecast?
Prediction of inflows and outflows
Predict and manage shortfalls
Track and target
Use it for a loan
What is meant by liabilities
Money you owe
How do you calculate total costs
Fixed costs + variable costs
What is the gross profit?
Calculate the margin of safety. The business sells 150 units. The break even point is 127
23
How do you calculate net cash flow on a cash flow forecast?
Inflows - outflows
What is meant by current assets?
Things you own- cash/ stock etc
Is this a start up cost or running cost:
Heating a shop
running
What is net profit
gross profit - expenditure
One downside to working out break even?
Variable costs change so cannot be reliable
Cheaper supplier
Cheaper rent etc
What is meant by trade receivables?
Money you are owed from suppliers