Business definitions

• Revenue is the money that a business receives from selling its goods or services.
• Cost is the amount of money that a business spends on its operations.
• Fixed costs are costs that stay the same with the level of output e.g rent.
• Variable costs are those that change with the level of output of the business e.g raw materials.
• Total cost is the total expenditure of a business over a time period.
• Profit is the money that a business makes after all costs have been subtracted from the revenue.
• Cash is physical money needed to pay on a day to day expenses.
• Loss is the amount of money by which a business's costs exceed its revenue.
• Gross profit is the profit made by the business after subtracting all the costs relating to manufacturing and selling the products.
• Operating profit is the profit from operating after taking off the expenses.
• Net profit is the profit made by the business after all expenses have been subtracted from revenues, these are financial expenses and any other expenses.
• Break-even is the level of output at which revenues from sales equal total costs.
• Break-even revenue is the amount of sales a business needs to achieve in order to pay costs and start making a profit.
• Margin of safety is the difference between actual output and breakeven output.
• Variance arise when there is a difference between actual and budgeted figures, positive/favourable = better than expected, adverse/unfavourable = worse than expected.
• Current ratio measures a company’s ability to pay current or short term liabilities e.g debts.
• Acid test ratio measures whether a company has sufficient short term assets to cover its immediate liabilities.
• Working capital is the cash available to a business to allow it to operate on a day to day basis.
• Net cash flow is the amount of cash entering and leaving the business during a given time period.
• Closing balance is the amount of money available to a business at the end of a specific accounting period.
• Capacity utilisation is a measure of the extent to which the productive capacity of a business is being used
• Labour productivity is the output per worker in a time period