Business Unit 23 and 24 2 and 4 mark questions

Define ‘opening balance’

Amount of cash held by a business at the start of the month / trading period

Define ‘working capital’

Current assets – current liabilities

Define ‘retained profit’

Profit (left, or) reinvested back into the business, (after all payments have been made)

What is meant by the ‘private sector’

when business activities are owned by individuals/groups of individuals

Define ‘revenue’

Define ‘cost of sales’

Cost of purchasing the goods used to make the products sold

Identify one cash inflow and one cash outflow a business might have

• Cash inflow: Money from cash

• Cash outflow: Payments to employees

Identify two financial statements a public limited company is legally required to publish each year

• Income statement (Profit and loss)

• Statement of financial position (Balance sheet)

Identify two reasons why a business might have cash-flow problems

• Too much inventory

• Growing too quickly/overtrading

Working Capital

Working Capitol = Current Assets - Current Liabilities

Revenue

Revenue = (Quantity OR Number of Customers) x (Price OR Average Spend)

Revenue from Market Share = Total Market Value x Market Share %

Net Cash Flow

Net Cash Flow = Total Cash Inflows - Total Cash outflows

Closing Balance

Closing Balance = Opening Balance + Net Cash Flow

Opening Balance (Current Period)

Opening Balance (Current Period) = Closing Balance (Previous Period)

Total Revenue

Total Revenue = Price × Quantity

Variable Cost

Variable Cost = Variable Cost per Unit × Quantity

Total Cost

Total Cost = Fixed Costs + Variable Costs

Profit

Profit = Total Revenue - Total Cost

Unit Contribution

Unit Contribution = Price - Variable Cost per Unit

Total Contribution

Total Contribution

Profit

Profit = Total Contribution - Fixed Costs