1.3 Putting a business idea into practice

What is an aim?

General goals that a business sets.

The purpose for a businesses existence.

What is an objective?

Things that contribute to a business achieving their aim.

Examples of financial aims and objectives?

Survival

Profit

Sales

Market share

Financial security

Examples of non-financial aims and objectives?

Social objectives

Personal satisfaction

Challenge

Independence

Control

Why do aims and objectives differ between businesses?

What stage the business is in.

What the owner wants to do

Define revenue?

Amount of income reviewed from selling goods or services over a period of time.

Formula for revenue?

Revenue = price x quantity

Define fixed costs?

Costs that don’t change with output.

Define variable costs?

Costs that change directly with number of products made.

Formula for variable costs?

Variable costs = cost of one unit x quantity produced

Define total costs?

All the cost of a business.

Formula for total costs?

Total cost = fixes costs + variable costs

Define profit?

When a businesses revenue is greater than its total costs.

Define loss?

When a businesses total costs is greater than their profit.

Formula fro profit?

Sales revenue - cost of sales

Formula for interest?

Interest = total repayment - borrowed money / borrowed amount x100

Formula for break-even point in units?

Fixed costs / sales price - variable costs

Formula for break-even point in revenue/costs?

Break-even point in units x sales price

What is the margin of safety?

The amount of output between actual level of output and break-even level of output.

Formula for margin of safety?

Actual or budgeted sales - break-even sales