Business Keywords 1.3

Aims

Aims

A general statement of where you're heading, for example 'to get to university'

Market share

The percentage of a market held by one company or brand.

Objectives

A clear, measurable goal, so success or failure is clear to see

SMART objectives

Targets that are specific, measurable, achievable, realistic and time-bound

Social objectives

Likely to be non-financial and designed to improve the quality of life for a community

Survival

Keeping the business going, which ultimately depends on determination and cash

Fixed costs

Costs that don't vary just because output varies, for example rent (sometimes called overheads)

Variable costs

Costs that DO vary with changes in output, for example packaging

Interest

The charges made by banks for the cash they lent to a business, for example six per cent per year

Profit

= TOTAL REVENUE - TOTAL COSTS The amount of revenue left over once costs have been deducted.

Revenue

= PRICE x QUANTITY The total value of the sales made within a set period of time

Total costs

= VARIABLE COSTS + FIXED COSTS All the costs (both fixed and variable) for a set period of time

Break-even

The level of sales at which total costs are equal to total revenue. At this point the business is making neither a profit nor a loss. FIXED COSTS = --------------------------------------------- PRICE - VARIABLE COSTS PER UNIT

Break-even chart

A graph showing a company's revenue and total costs at all possible levels of output

Margin of safety

The amount by which demand can fall before the business starts making losses = SALES - BREAK-EVEN OUTPUT

Cash

The money a firm holds in notes, coins and in its bank accounts

Cash flow

The movement of money into and out of the firm's bank account

Insolvency

What a business lacks the cash to pay its debts

Overdraft

A facility offered by a bank that allows an account holder to borrow money at short notice

Overdraft facility

An agreed maximum level of overdraft

Cash flow forecast

Estimating the likely flows of cash over the coming months and, therefore, the overall state of the bank balance

Closing balance

The amount of cash left in the bank at the end of the month

Negative cash flow

When cash outflows are greater than cash inflows

Stable cash flow

When cash outflows are the same as cash inflows

Positive cash flow

When cash outflows are less than cash inflows

Net cash flow

Cash in minus cash out over a period of time

Opening balance

The amount of cash in the bank at the start of the month

Crowdfunding

Raising capital online from many small investors (but not through the stock exchange)

Dividends

Payments made to shareholders from the company's yearly profits. Company directors decide how much, if any, they will pay in dividends

Retained profit

Profit kept within the business (not paid out in dividends)

Share capital

Raising finance by selling part ownership in the business. Shareholders have the right to question the directors and to receive part of the yearly profits as dividends

Trade credit

When a supplier provides goods but is willing to wait to be paid - for perhaps up to three months.

Venture Capital

A combination of share capital and loan capital, proved by an investor willing to take a chance on the success of a small to medium-sized business.

Loans

Money lent (often by a bank) which will be paid back over a period of time, with Interest.

Asset

Any item of value that a business owns eg machinery

Security

When the lender asks the borrower to put up an asset which can be taken if the loan is not paid back