BTEC *Unit 2 finance*

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Gracia B
Flashcards by Gracia B, updated more than 1 year ago
Gracia B
Created by Gracia B over 9 years ago
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Question Answer
what is a Start-up costs? The expenses incurred when starting a business. E.g. Cash register, buying and installing a sign
what is Operating (running) costs? The expenses paid out on a day to day basis e.g. Raw materials, utility's and rent.
what is Fixed costs? Expenses that say the same. E.g. Rent or/and bills
What is Variable costs? Costs that vary depending on the input e.g. Wages and raw materials.
what is Direct costs? Costs that are directly related to that certain output. For example: stuffing for a teddy bear making factory.
What is Indirect costs? Is independent of the output, for example cost of staff uniforms.
Formula for total cost Fixed cost + variable cost = total cost
Formula for revenue Number of sales x price per unit = revenue
Formula for profit/loss Revenue - Expenditure = profit
Define the term break even point. When a business has generated enough revenue to cover the cost of sales (cost of making that product).
what is a Break-even chart? It shows roughly how much money is needed in order to reach break even.
what is a break even? Where there is no profit or loss. The money made equals the exact amount of money spent.
Break-even formula Fixed cost/selling price per unit - variable cost per unit = break-even
what is The purpose of Budgeting? To keep expenditure to a planed limit, because if expenditure is less that revenue, the business will make a profit.
whta is Cast flow? The money going in and out of the business on a daily basis.
what is a Cast flow forecast? 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.
what is Cost of sales? The money it costs to make a product.
Gross profit formula Revenue - cost of sales = gross profit
Net profit formula Gross profit - expenditure(overheads) = net profit
what is a Financial statements? Show whether a business is doing well or not.
what is a Income statement (profit and loss account)? Shows profit or loss.
what is a Statement of financial position (balance sheet)? This lists assets and liabilities.
what are Assests? Items owned by the business that are worth money.
what are Liabilities? Debts or obligations that the business has.
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