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Buss1 Key Terms AS

Buss1 Financial Planning

QuestionAnswer
What is left after costs have been deduced from revenue. Profit = Total revenue – total costs. Profit
These are expenditures made by a business as part of its trading operations. Costs
The value of sales made during a trading period. Total revenue = selling price x number of items sold. Revenue
Costs that do not change with the level of output or sales. Fixed Costs
Costs that change directly with the level of output or sales. Variable Costs
Fixed costs + variable costs. Total Costs
This is the difference between sales revenue and variable costs of production. Contribution
This is the difference between the selling price of one unit and the variable cost of producing one unit. Contribution per Unit
Unit contribution x no. of units sold. Total Contribution
This is the level of output or the number of customers that earns enough revenue to cover total costs of production. Break-even Level of Output
This is the amount by which the existing level of output is greater than the break-even point. Margin of Safety
The total cash payments (inflows) into a business minus the total cash payments (outflows). Cash Flow
This is turning assets into cash and may be insisted on by courts if suppliers have not been paid. Liquidation
When a business cannot meet its short-term debts. Insolvent
Payments in cash received by a business such as those from customers or from the bank e.g. receiving a loan. Cash Inflows
Payments in cash made by a business such as those to suppliers and workers. Cash Outflows
These are customers who have bought products on credit and will pay cash at an agreed date in the future. Debtors
Value of goods sold to customers who do not pay cash immediately. Credit Sales
An estimate of the firm’s future cash inflows and outflows. Cash Flow Forecast
The estimated difference between monthly cash inflows and outflows. Net Monthly Cash Flow
Cash held by the business at the start of the month. Opening Balance
Cash held at the end of the month – becomes next month’s opening balance. Closing Balance
Financial targets for the future covering revenue (income) and expenditure over a certain time period. Budgets
A fixed sum of money to be spent in a given time period by a department. Expenditure Budgets
A person who is accountable for seeing that a budget is kept to. Budget Holder
The sales revenue target for a department or the whole business. Income Budget
Giving some control in the setting and spending of budgets to departments or individuals. Delegated Budgets
The target profit for the business over a given time period. Profit Budget
Keeping a check on progress towards achieving targets during the budget period. Monitoring Budgets
Clearly defined targets for a business to achieve over a certain time period. Business Objectives
The estimated difference between monthly cash inflows and outflows. Net Monthly Cash Flow
Cash held by the business at the start of the month. Opening Balance
Cash held at the end of the month – becomes next month’s opening balance. Closing Balance
Financial targets for the future covering revenue (income) and expenditure over a certain time period. Budgets
A fixed sum of money to be spent in a given time period by a department. Expenditure Budgets
A person who is accountable for seeing that a budget is kept to. Budget Holder
The sales revenue target for a department or the whole business. Income Budget
Giving some control in the setting and spending of budgets to departments or individuals. Delegated Budgets
The target profit for the business over a given time period. Profit Budget
Keeping a check on progress towards achieving targets during the budget period. Monitoring Budgets
Clearly defined targets for a business to achieve over a certain time period. Business Objectives
Making enough profit without risking too much stress or loss of control through employment of too many professional managers. Profit Satisficing
Created by: carole appleton