1.3

• what is an aim 


  long term goals that explain what a business wants to acieve
• what is an objective


  short term steps a business takes to achieve its aims
• why does a business set aims and objectives


  • to allow the business to share its direction with staff so they know what to focus on and are motivated to perform
  • to enable a business to measure its performance
  • to help a business plan for the future
• what is a private sector business


  a business that is privately owned
• what is a public sector business


  a business run by the government for the benefit of society e.g schools, hospitals, fire service
• what is a not for profit organisation 


  organisations and charities
• what aims and objectives does a private sector business have


  ones that maximise profit, market share or expand the business
• what aims and objectives does a public sector business focus on


  ones that focus on delivering a service to customers and keeping costs to a minimum
• what aims and objectives does a not for profit focus on


  aim to fundraise or collect donations for specific purposes
• what are social enterprises


  they use business techniques to sell products or services for profit which is invested to benefit society or the environment rather than paid out to individual shareholders
• what are financial aims and objectives


  aims nad objectives that relate to money
• what are some financial aims and objectives

  • survival
  • maximise profit
  • increase volume of sales
  • increase market shares
  • receive financial security and personal wealth
• what are non financial aims and objectives


  aims and objectives which ae not money related
• what are som non financial aims and objectives

  • social objectives (e.g providing goods and services which are kind to the environment or aim to eliminate poverty)
  • personal satisfaction
  • entrepreneur challenging themselves with a new venture
  • independance/being your own boss
  • flexible working hours
  • more freedom for a work/life balance
• what is the formula for revenue


  price x quantity sold
• what are direct costs


  costs which relate directly to the production of goods and services e.g labour, packaging, raw materials
• what are indirect costs


  costs that are not directly related to the production of products or services e.g insurance, heating, salaries
• what are fixed costs


  costs that don't change with output
• what are variable costs


  costs that change with output
• what is the formula for variable costs


  variable cost per unit x quantity sold
• what is the formula for total costs


  fixed costrs + variable costs
• what are some examples of fixed costs


  salaries, rent, advertising
• what are some examples of varibale costs

  raw materials and packaging
• what is profit


  the ammount of revenue left over after deduction of costs
• what is the formula for profit


  reveune - total costs
• what is interest


  an added cost for borrowing money from the bank or money received from the bank for using their accounts
• what is the formula for interest

  (total repayment - borrowed ammount) / borrowed amount x 100
• what is break even


  the number of sales a business needs to have in order for it;s costs and revenue to be the same
• what is contribution per unit


  how much each sale contribution towards fixed costs
• what is the formula for contribution per unit


  selling price - variable costs
• what is margin of safety


  the difference between the actual number of sales made compared to the break even sales
• what is the formula for margin of safety


  actual sales otput - break even point
• any change in selling price or total costs will have an effect on brek even point
• break veen is a way for business' to figure out how many products they need to sell in order for their costs to be covered
• what is cash flow


  cash flow is the flow of cash in and out of a business
• what is cash inflow


  cash inflow is cash paid into a business based on a variety of sources e.g sales, payments form customers and bank interest
• what is cash outflow


  cash outflow is cash paid out of a business e.g suppliers, wages, loan repayments
• what is a positive net cash flow


  when the business experiences more cash inflow tha cash outflow
• what is a cash deficit


  when a business experiences more cash outflows tha cash inflows
• why is cah flow so important

  • cash flow is critical for business survival
  • having too little cash when bills are due is knowns as insolvency which means the business will fail if it can't pay bills on time