Katherine’s

• Contribution


  A really important part of understanding breakeven, it's the idea that by selling items a business can create some kind of contribution to its fixed costs, and once those fixed costs are covered, any additional sales contribute directly to profit
• Contribution


  • What the business needs to achieve in order first of all to cover its fixed costs and thereafter make a profit
• Total contribution


  Calculated by taking total revenues for the business and taking away the total variable costs
• Contribution per unit


  Calculated by taking the selling price per unit and subtracting the variable cost per unit
• Calculating contribution per unit

  Selling price per unit - Variable cost per unit
• Calculating total contribution


  Total revenues - Total variable costs
• Contribution per unit


  An incredibly useful concept for calculating the break-even output
• The business is selling 3,000 units, which is more than the break-even output of 1,667 units, so it is making a profit
• Personal finance


  Understanding why money is important and how managing your money can help prevent future financial difficulties
• You will make important financial decisions throughout your life
• The choices you make will not be without some risk and need to be taken very carefully
• This unit will help you understand how to manage your personal finances and make informed decisions to help prevent future financial difficulties
• Money


  Flows in two directions, into your ownership and out
• Sources of money coming in

  • Wages
  • Gifts
  • Savings
• Uses of money going out


  • Necessities
  • Wants
• The ability to handle money received, and to control money paid, is a fundamental requirement for personal and business success
• Functions of money


  • Unit of account
  • Means of exchange
  • Store of value
  • Legal tender
• Unit of account


  It allows us to place a monetary value on goods and services
• Means of exchange


  It allows us to trade
• Store of value


  It allows us to use it in the future as it keeps its value
• Legal tender


  It is a legally recognised form of payment
• Factors affecting the role of money

  • Personal attitudes
  • Life stages
  • Culture
  • Life events
  • External influences
  • Interest rates
• Personal attitudes


  Individuals will vary in their attitude to risk and reward as well as saving and borrowing
• Life stages


  • Childhood
  • Adolescence
  • Young adult
  • Middle age
  • Old age
• Culture


  Different cultures, affected by tradition, religion and ethical beliefs, will have different attitudes to money
• Life events


  Events throughout your life will impact on your attitude to money
• External influences


  Factors outside your control, including the state of the economy, will have an impact
• Interest rates


  When interest rates are low you may be more willing to borrow money or spend on credit. When interest rates are high there is more of an incentive to save.
• To remain solvent, you should set financial targets and goals
• Savings will also help provide a safety net for the future, for example to provide insurance against loss or injury
• Inflation is a general rise in prices. This leads to the value of money falling, that is, £10 today is worth less than £10 ten years ago
• Common principles in planning personal finance

  • Avoid getting into debt
  • Control costs
  • Avoid legal action and/or repossession
  • Remain solvent
  • Maintain a good credit rating
  • Avoid bankruptcy
  • Manage money to fund purchases
  • Generate income and savings
  • Set financial targets and goals
  • Provide insurance against loss or illness
  • Counter the effects of inflation
• Methods of payment


  • Cash
  • Debit card
  • Credit card
  • Cheque
• Cash


  Notes and coins in a wide range of denominations
• Debit card


  Issued by banks with payments for goods and services being deducted directly from a current account
• Credit card


  Issued by financial institutions allowing customers to delay payments for goods and services
• Cheque


  A written order to a bank to make a payment for a specific amount of money from one person's account to another account
• Current account


  An account with a bank or building society designed for frequent use, e.g. regular deposits and withdrawals
• Overdraft


  The ability to withdraw money that you do not have from a current account
• Types of current account

  • Standard
  • Packaged, premium
  • Basic
  • Student