Studied by 12 people
Cash flow
The flow of cash into and out of the business
External constraints
Something outside the firms control that can prevent it achieving its objectives
Full capacity
When th business is fully utilising all it's assets
Stakeholders
Groups with an interest you know we in the success or failure of a firms decision and actions
Dynamic pricing
Using software that allows changing demand and supply levels to set changing prices
Piece rate labour
Paying workers per unit they make
Profit margin
Profit as a percentage of sales revenue
fixed cost
cost that don’t change in accordance to output
Total cost
All the costs of producing a specific output level
Total variable cost
All the variables costs of productising a specific output level.
Variable cost
The costs of producing one unit
Break even
Fixed cost/contribution per unit
Contribution per unit
Selling price - variable costs per unit
Margin of safety
Sales volume - break even
Cash flow forecast
Estimating future monthly cash inflows and outflows
Debt factoring
Obtaining part payment of the amount owed From a factoring company
Overdraft
Short term borrowing from a bank. The business only borrows as much as it needs to cover
Gross profit margin
(Gross profit/sales revenue) *100
Operating profit margin
(Operating profit/sales)*100
Net profit margin
(Net profit(before tax)/sales)*100
How to calculate Return on capital employed (ROCE)
(Operating profit/capital employed)*100
How to calculate return on investment
((Net return - investment cost)/original investment)*100
How to improve profit
Increase selling price
Increase output
reduce fixed and variable cost (e.g cheaper packaging)
How to improve cash flow
Cut down on cost
delay payments
cut back on expansion plans
How to improve break even
Reduce fixed cos
reduce variable cost
increase price on product
External sources of finance
Leasing \n Hire purchases \n Government finance \n Trade credit
Bank loan - Short-term
Overdraft - Short-term \n Debt factoring - Short-term \n Crowdfunding - Short term \n Venture capital - Long-term \n Share capital/equity - Long-term \n Mortgages - Long-term \n Debentures - Long-term
Internal sources of finance
Personal sources \n Retained profits \n Share capital
Cash flow
The cash being transferred into and out of the business
Define budgeting
An estimate of income and expenditure for a set period of time
Define variance
The difference between an actual amount and a pre-determined standard amount or the amount budgeted.
What is a budget?
a spending plan based on income and expenses
3 types of budgets
profit, income, expenditure
Expenditure budget
predict how much business will spend over a period of time
Income budgets
predicts how much money will come in from sales
Profit budget
Income budget - expenditure budget
What is a contingency cost?
An amount included in a budget to cover any unexpected issues
Benefit of budgets
makes sure businesses doesn’t spend money they don’t have
Drawbacks of budgets
hard for a new business as they have no past data
Note 
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