Key Terms

Flashcards by patrick.j.dohert, updated more than 1 year ago
Created by patrick.j.dohert about 6 years ago


BTEC Business studies Unit 2 Finance

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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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