14 business revenue, costs and profit

• Fixed costs are costs that don't vary with output, like rent
• Interest is the charge made by banks for the cash they have lent to a business, for example six per cent per year
• Interest rate is the annual cost of a loan to the borrower
• Profit is the difference between revenue and total costs; if the figure is negative, the business is making a loss
• Sales revenue is the total value of sales made within a set period of time, such as a month
• Total costs are all the costs for a set period of time, such as a month
• Variable costs are costs that vary as output varies, such as raw materials
• Sales revenue = price x quantity sold
• Total costs = variable costs + fixed costs
• Profit = revenue - total costs
• If costs are greater than revenue, the result will be a negative number, indicating a loss
• Fixed costs are often related to a time period rather than sales or output, like rent
• Examples of fixed costs include salaries of permanent staff, rent, and interest payments on borrowings
• Interest payments are calculated by multiplying the loan amount by the interest rate
• For example, a business with a three-year loan of £8,000 at an interest rate of eight per cent would pay £640 per year, totaling £1,920 over three years
• To calculate interest charges on an overdraft, multiply the average overdraft amount by the interest rate
• When planning a business, fixed costs like rent and salaries can be estimated by researching local rates and salaries
• To estimate variable costs for a kebab shop, an internet search can provide names of doner kebab meat suppliers, with an example cost of 30p per kebab for 450 kebabs, but a cautious estimate would allow for 60p in meat variable costs plus additional costs like pitta bread and salad, totaling perhaps £1 per kebab
• Fixed costs of a kebab shop are estimated at £1,200 per week, while variable costs per kebab are £1, allowing for the calculation of total costs at different levels of business, ensuring that revenues exceed total costs for profitability
• Variable costs in business are costs that vary with the quantity sold and made, such as raw materials, bought-in components, and energy used in the production process
• Fixed costs, on the other hand, do not change as output changes and must be paid regardless of sales levels, like rent for a shop, representing costs that are fixed in relation to output
• Sales revenue in business is determined by the quantity sold multiplied by the price charged, with the formula: revenue = quantity × price, highlighting the importance of managing costs and pricing strategies for profitability
• Price in business can be a critical factor influenced by market conditions, competition, and consumer response, impacting revenue and overall business success
• Demand for a product or service can greatly influence revenue forecasts, with some businesses having predictable demand like Beyoncé's concert tours or Heinz baked beans sales, while others face uncertainties due to market fluctuations and external factors
• a market research report is an analysis of the information gathered from primary or secondary sources
• market research reports can be used to identify trends, opportunities and threats that may affect your business
• the main types of market research are quantitative and qualitative
• market research reports may include data about competitors, target markets, trends, opportunities, threats, strengths, weaknesses, and potential risks associated with starting a new venture.
• Market research helps entrepreneurs make informed decisions about their products, services, marketing strategy, and pricing policy.
• Market research helps businesses make informed decisions about their products and services.