1.3

• ways to compete other than price:

  • quality
  • convenience
  • Promotion
• financial aims:

  • profit
  • business survival
  • financial security
• non-financial aims:

  • control
  • independence
  • personal satisfaction
• sales revenue - total income earned from sales


  selling price x quantity
• fixed costs - costs that dont change


  total cost - variable cost
• variable cost - cost that changes with output


  cost per unit x quantity
• total cost


  fixed cost + variable cost
• profit


  sales revenue - total cost
• breakeven - when total revenue = total costs


  fixed cost/(selling price - variable cost)
• margin of safety - how much sales can fall before the business starts making a loss


  actual sales - breakeven point
• cash is important to a business because:

  • allows you to pay staff
  • prevents insolvency
• difference between cash and profit:

  cash - money the business has at a particular time

  profit - money that isnt accessible right away
• cash inflow - money coming into the business

  add up total receipts
• cash outflow - money coming out of the business

  add up total payments
• net cash flow

  cash inflow - cash outflow
• opening balance - the amount of money you expect to have at the beginning of each month

  (same as last months closing balance)
• closing balance- the amount of money you expect to have left at the end of the month

  (net cash flow + opening balance)
• short term finance:

  • trade credit
  • bank overdraft
• long term finance:

  • venture capital
  • share capital
  • loans