theme 2

economic variables

features of an economy which have effects on business and consumers

business angels

individuals who invest in a business in return for a stake in the business

grant

a sum of money given by the government or another organisation

limited liability

the obligation of a shareholder for the debts of a business is limited to the value of their investment

unlimited liability

the obligation of a business owner to cover all of the debts of the business

closing balance

net cash flow + opening balance

leasing

a contract to acquire the use of resources such as property or equipment

venture capital

external source of finance when the business issues shares to a small number of investors in return for a capital injection into the game

economic uncertainty

where firms/consumers are unable to predict their future sales/income and costs

average cost

the cost of producing one unit

total costs/output

break even

The level of output where the total revenue is equal to the total cost

fixed cost/unit contribution

unit contribution

sellng price - variable cost per unit

margin of safety

the difference between the current and planned level of output/sales and the break even level of output

adverse variance

higher costs than budget

favourable variance

lower cots than budget

budget

a financial plan of income/expenditure prepared in advance

historical budgeting

a budget based on previous financial figures

variance analysis

difference between budgeted and actual figures

zero based budget

no money has been allocated for spending unless it has been firstly justified

gross profit

revenue - cost of sales

operating profit

gross profit - other operating expenses

profit for the year (net profit)

operating profit - interest

profit for the year margin

net profit/sales revenue x 100

profitability

profit as a proportion of sales