BTEC *Unit 2 finance* Business key terms and formulas. – Flashcards
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The expenses incurred when starting a business. E.g. Cash register, buying and installing a sign
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Start-up costs
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The expenses paid out on a day to day basis e.g. Raw materials, utility's and rent.
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Operating (running) costs
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Expenses that say the same. E.g. Rent or/and bills
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Fixed costs
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Costs that vary depending on the input e.g. Wages and raw materials.
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Variable costs
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Costs that are directly related to that certain output. For example: stuffing for a teddy bear making factory.
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Direct costs
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Is independent of the output, for example cost of staff uniforms.
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Indirect costs
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Fixed cost + variable cost = total cost
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Formula for total cost
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Number of sales x price per unit = revenue
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Formula for revenue
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Revenue - Expenditure = profit
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Formula for profit/loss
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When a business has generated enough revenue to cover the cost of sales (cost of making that product).
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Define the term break even point.
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It shows roughly how much money is needed in order to reach break even.
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Break-even chart
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Where there is no profit or loss. The money made equals the exact amount of money spent.
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Break-even
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Fixed cost/selling price per unit - variable cost per unit = break-even
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Break-even formula
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To keep expenditure to a planed limit, because if expenditure is less that revenue, the business will make a profit.
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The purpose of Budgeting
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The money going in and out of the business on a daily basis.
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Cast flow
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A predication of what the future inflows and outflows may be. Enables the owner to spot any problems before it's too late thus avoiding negative cash flow.
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Cast flow forecast
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The money it costs to make a product.
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Cost of sales
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Revenue - cost of sales = gross profit
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Gross profit formula
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Gross profit - expenditure(overheads) = net profit
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Net profit formula
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Show whether a business is doing well or not.
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Financial statements
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Shows profit or loss.
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Income statement (profit and loss account)
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This lists assets and liabilities.
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Statement of financial position (balance sheet)
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Items owned by the business that are worth money.
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Assests
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Debts or obligations that the business has.
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Liabilities
