Topic 5: Finance

• Budget


  a financial plan for the future operations of the business's cost, profit and revenue
• Variance Analysis


  is the process of comparing the budget to the actual figure of the business
• Favourable Variance


  When costs are lower than expected or revenue is higher than expected

  earn more, spend less
• Adverse Variance


  When costs are higher than expected or revenue is lower than expected

  earn less, spend more
• Overdraft


  spend more money than you have, up to a certain limit
• Debt Factoring


  is when a business sells its debts to a third party at a discount to get immediate cash
• Break-even analysis


  a financial tool to identify the minimum quantity of a product a company needs to sell to cover its costs
• Breakeven output


  the number of units a business needs to sell so that it makes neither profit or loss
• Contribution

  is what a business needs to achieve from selling products in order to first cover its fixed costs and therefore make a profit
• Venture capital


  a type of investment where investors give money to startups or small businesses that have the potential for long-term growth
• Crowdfunding


  is a way of raising money for a project by asking a large number of people to contribute a small amount, usually via the Internet
• Margin of safety


  the difference between the actual output - break even output
• Debt Capital
• Equity Capital