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| Question | Answer |
| Fixed cost | Costs that do not change with output- they have to be paid regardless of how much a business produces |
| Variable costs | Costs that do change with output- these costs are directly linked to the product or service |
| Start-up cost | Costs that a business has to pay when the business sets up. For examples, fixtures and fittings |
| Operating costs (running costs) | Costs that have to be paid for the day to day running of the business. For example, heat, light, rent etc... |
| Total costs | TC= FC + VC |
| Revenue | This is the money that comes into the business. It is also known as turnover or revenue |
| Profit | This is the amount of money that the business earns AFTER paying for all of its costs |
| Break-even | Level of output where total revenue = total costs |
| Margin of safety | This is the difference between your break-even point and the number of units you expect to sell |
| Cash flow forecasting | This is a forecast the business makes for what it expects to have coming into the business and out of the business |
| Inflows | Money coming into the business |
| Outflows | Money going out of the business |
| Cost of sales | Costs linked directly with the production of a product |
| Gross profit | Costs linked directly with the production of a product |
| Net profit | NP = Gross profit - expenditure |
| Income statement (profit and loss) | A statement of income and expenditure-usually produced every 12 months |
| Balance sheets (statement of financial position) | A statement outlining the financial position of the business |
| Assets | Things that the business owns |
| Liabilities | Things that the business owes |
| Sources of finance | Ways in which the business can raise money. These can be internal (from within the business) and external (outside of the business) |
| Budgeting | The process of planning income and expenditure within a business |
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