Business - Finance


AS level business for OCR (part of double award)
Mind Map by LouisTaylor_, updated more than 1 year ago
Created by LouisTaylor_ over 10 years ago

Resource summary

Business - Finance
  1. Break Even
    1. KEY TERM: When the total revenue is the same as the total fixed costs and there is no gain or loss in profits
      1. Calculations
        1. Variable Costs = number of units x price per unit
          1. Fixed costs remain the same
            1. Total Costs = Variable + Fixed
              1. Revenue = selling price x Quantity Sold
              2. Margin of Safey
                1. The difference between the break-even output and the expected output
              3. Terms
                1. Share Capital - Capital raised by selling shares on the stock market or privatly
                  1. Factoring - A service offered by a financial institution to pay an invoice which has not yet been paid
                    1. They provide a cash advance of around 80%
                    2. Mortgage - A commercial loan which help to purchase buildings or land.
                      1. Can have fixed or variable interest rates and are usually taken out on a long term
                      2. Debentures - A long term loan that has to be paid back by a specific time and is an alternative to shares
                        1. Have fixed interest rates
                        2. Government - Will provide business start-up schemes, when a business wants to set up to provide a service to an underdeveloped area
                          1. EXAMPLE: Bringing employment to an area with high unemployment
                          2. Loan Capital - Money that is provided by borrowing from outside the business in terms of a loan
                            1. Ordinary Shares - A share which provides a fixed rate of return when a dividends is made
                              1. All share holders are entitled to the dividend
                              2. Trade Credit - An offer made to a company where they have between 30 and 90 days to pay for the goods or services that they have recieved
                                1. Working Capital - The money that is used in the day to day running of the business can be gained by selling stock that hasn't been used
                                2. Business Costs
                                  1. Direct Costs
                                    1. The costs which are directly used in the making of the items
                                      1. Examples
                                        1. Machinery
                                          1. Management Costs
                                            1. Office Rent
                                          2. Indirect Costs
                                            1. The costs that get the item to the customer
                                              1. Examples
                                                1. Raw Materials
                                                  1. Telephone Costs
                                                    1. Factory Labour
                                                  2. Marginal Costs
                                                    1. This allows the company to find out how much it will cost them to make one more product
                                                    2. Average Costs
                                                      1. This is how much it will cost to make each product
                                                      2. Fixed Costs
                                                        1. These are costs that do not change dependant on the output of products
                                                          1. Usually states as paid per month or annum
                                                          2. Examples
                                                            1. Rent
                                                              1. Management Costs
                                                            2. Variable Costs
                                                              1. These costs are dependant on the output of products
                                                                1. Usually stated as a price that is paid per object used
                                                                2. Examples
                                                                  1. Employee Wages
                                                                    1. Materials
                                                                  2. Total Costs
                                                                    1. These costs are the fixed and variable costs added together
                                                                  3. Forecast
                                                                    1. This is when a company tries to predict what could happen in the future
                                                                      1. Businesses use previous data in order to forecast their financial year
                                                                        1. A business would need to forecast their income as well as their expenditure
                                                                          1. It is important that a business knows if they will have too much or too little money
                                                                        2. Sales Revenue
                                                                          1. Sales Revenue = Quantity Sold x Selling Price
                                                                            1. Increasing Sales Revenue
                                                                              1. Raising Sale Price
                                                                                1. Reducing The Sales Price
                                                                                  1. Increasing the Amount Sold
                                                                                2. Sources
                                                                                  1. Internal
                                                                                    1. Retained Profits
                                                                                      1. Most companies only allocate part of their profits to their share holder so can use the profits that were not shared as a source of finance
                                                                                      2. Collecting owed finances from customer etc.
                                                                                      3. External


                                                                                        1. Owner's Capital
                                                                                          1. Venture Capital
                                                                                            1. Borrowing
                                                                                              1. Bank Loans
                                                                                                1. Debentures
                                                                                                  1. Bank Overdrafts
                                                                                                    1. Hire Purchase
                                                                                                      1. Leasing
                                                                                                        1. Morgages
                                                                                                          1. Morgages
                                                                                                            1. Supliers
                                                                                                              1. Factoring
                                                                                                                1. Government Loans
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