Business st - key terms

aim

states the overall purpose for a business

mission

a general description of the overall aims

objectives

SMART - specific, measurable, achievable, realistic, timed targets

financial objectives

objectives that relate to survival, market share, growth, etc

non-financial objectives

social, environmental, and personal targets

revenue

the income gained by a business from selling goods and/or services

a form of cash inflow

costs

the spending that occurs to set up and run a business

fixed costs

costs that do not change with the output of a business

variable costs

costs that change with the output of a business

total costs

total variable + total fixed

profit

difference between total revenue and total costs

gross profit

the amount of money after the direct costs of the products have been deducted (costs of sales)

net profit

the profit a business has after all expenses have been deducted

interest (cost)

a business might borrow in the form of an overdraft, loan, or mortgage. the interest paid is a form of cash outflow

interest (reward)

interest on savings will be a cash inflow - a form of income. (not classed as revenue)

break even

break even is when the revenue earned by sales is equal to the cost of selling the output.

break even quantity

how many goods you must sell to break even

margin of safety

the difference between the break even point and the current level of output

formula for break even output

total fixed costs/price - variable cost per unit

cash

the amount of actual money that the business has at its disposal

cash inflow

cash coming into the business at the moment it comes in

cash outflow

cash leaving the business at the moment it leaves

cash flow forecast

a table showing predicted opening balances, cash inflows and outflows, net cash flows and closing balances

opening balance

the value of cash at the start of a trading period

closing balance

the value of cash at the end of a trading period

trade credit

the period of time a supplier gives its customers to pay after the goods have been delivered

security

the existence of a back up plan to pay if you cannot

internal sources of finance

involves raising funds from within the business

external sources of finance

involves raising funds outside of the business

retained profit

the profit that the business already has from selling goods

overdraft

a short-term source of finance - allows the business to withdraw funds from its account that are not there, to an agreed max limit, when additional amounts of temporary money are needed