Key Terms

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 costs	Costs that a business has to pay when the the business sets up. For example, 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.
Total costs	TC=FX+VC
Revenue	This is the amount of money that comes into the business. It is also know as turnover or revenue.
Profit	This is the amount of money that the business earns AFTER paying for all it's 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 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	GP=Sales-Cost of sales
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.
Assests	Things that a business owns
Liabilities	Things that a 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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	Created by patrick.j.dohert almost 9 years ago