3.1
Capital needed by an entrepreneur to set up a business
What is Start-up capital?
Costs that do not vary with output in the short run?
What is fixed costs?
Selling price of a product minus direct costs per unit?
A constant amount of depreciation is subtracted from the value of the asset each year
What is Straight-line depreciation?
(net profit / sales revenue) x 100
What is net profit margin? (%)
Raised from the business’s own assets or from profits left in the business (ploughed-back or retained profits)
What is Internal Finance?
The income received from the sale of a product?
What is revenue?
Unit contribution x output
What is total contribution?
One-off profit that cannot easily be repeated or sustained
What is Low-quality profit?
The ability of a firm to pay its short-term debts
What is liquidity?
Bank agrees to a business borrowing up to an agreed limit as and when required
What is overdraft?
Costs which cannot be identified with a unit of production or allocated accurately to a cost centre - also known as overhead costs
What are Indirect Costs?
The level of output at which total costs equal total revenue?
What is break-even?
Arises when a business is valued at or sold for more than the balance sheet values of its assets
What is Goodwill?
(non-current assets + current assets) - current liabilities or non-current liabilities + shareholders' equity. The total capital invested in the business.
What is capital employed?
The capital needed to pay for raw materials, day-to-day running costs and credit offered to customers. In accounting terms: working capital = current assets - current liabilities
What is Working capital?
The income that an organisation gets from a particular activity?
What is revenue stream?
The decline in the estimated value of a fixed asset over time
What is depreciation?
A constant amount of depreciation is subtracted from the value of the asset each year
What is Straight-line depreciation?
current assets / current liabilities
Obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period. This avoids the need for the business to raise long-term capital to buy the asset; ownership remains with the leasing company
What is leasing?
Costs that have both a fixed and a variable cost element
The amount by which the output level exceeds the break-even level of output
What is margin of safety?
Profit that can be repeated and sustained
What is High-quality profit?
(gross profit / sales revenue) x 100
What is gross profit margin? (%)