Finance

Question	Answer
Start up costs	Costs a business will incur when it firsts sets up e.g. buying equipment
Ongoing costs	Costs of running the business e.g. electricity
Sales Revenue	The income generated from sales of goods or services. Price x quantity
Fixed costs	Any costs that do not vary directly with the level of output e.g. rent
Variable costs	Costs that do vary directly with the level of output e.g. raw materials
Total variable costs	All the variable costs of producing a specific output level. Variable costs per unit x number of units sold
Total costs	This is the sum of fixed and variable costs.
Profit	The difference that arises when a firm’s sales revenue exceeds its total costs. Total Revenue – Total costs. Or Total contribution - overheads
Break even	The point at which total revenue = total costs. The business does not make a profit, or a loss. Formula = Fixed Costs/Selling Price – Variable cost
Cash flow forecast	A detailed estimate of when values of money are expected to flow in and out of the business.
Net cash flow	Difference between total inflows and total outflows
Profit and Loss Account	A financial statement used to show how a business has performed over a period of time
Cost of sales	The cost of producing a product
Gross profit	The money made from sales after the cost of sales has been deducted FORMULA: Sales – Cost of Sales
Net profit	The money made from gross profit once the expenses have been deducted FORMULA: Gross Profit - Expenses
Balance sheet	Financial statement used to show the financial position (the value) of a business at a point in time
Fixed assets	Something a business owns, the value of which last more than one year e.g. machinery, equipment
Current assets	Something a business owns, the value of which will change within one year e.g. cash, bank, debtors
Current liabilities	Something the business owes, the value of which will change within one year e.g. suppliers
Long term liabilities	Something the business owes, the value of which lasts more than one year e.g. bank loan
Working capital	Current assets – current liabilities
Net assets	Fixed assets plus working capital
Liquidity	The ability of a firm to meet its short term debts

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	Created by pamelamossman about 10 years ago