AQA A Level Business - Unit 5

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

Plc

A company with limited liability and shares that are available to the public. It's shares are usually quoted on the stock exchange

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

Fixed cost

These costs do not vary with output

Piece rate labour

Paying workers per unit they make

Profit margin

Profit as a percentage of sales revenue

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 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

Reduced fixed cost

Reduce variable cost

How to improve cash flow

Cut down on cost

Cutting down on cost

Delay payments

Cut back on expansion plans

How to improve break even

Reduce fix cost

Reduce variable cost

Increase the price on the product

External sources of finance

Leasing

Hire purchases

Debt factoring

Government finance

Trade credit

Internal sources of finance

Personal sources

Retained profits

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.