Business key terms/formula

• Total costs = Total fixed costs + Total variable costs
• Variable costs = Cost of one unit x Quantity produced
• Revenue = Price X Quantity
• Break-even in units = fixed costs / sales price - variable costs
• Break-even point in costs / Revenue = Break-even point in units x Sales price per unit
• Margin of safety = Actual or budgeted sales - Break-even sales
• Interest on loans in % = total repayment - borrowed amount / borrowed amount x 100
• Net cash flow = Cash inflows (receipts) - Cash outflows in a given period (payments)
• Opening balance = Closing balance of the previous period
• Closing balance = Opening balance + Net cash flow
• Profit / losses = Total revenue - Total costs
• Gross profit = Sales revenue - Cost of sales
• Gross profit margin (%) = Gross profit / Revenue x 100
• Net profit = Gross profit - Other operating expenses and interest
• Net profit margin (%) = Net profit / Revenue x 100
• Average rate of return (%) = Average annual profit (Total profit / No. of years) / cost of investment x 100
• Percentage growth = Increase in size / Original size x 100
• Asset: any item of value that a business owns, such as its machinery or premises.
• Bank overdraft: a facility offered by a bank that allows an account holder to borrow money at short notice.
• Biased: unbalanced or inclined to agree with a particular judgement or idea rather than presenting the evidence fairly.
• Brand loyalty: a customer's willingness to buy a product from a particular business rather than from its competitors.
• Business plan: a document that outlines how an entrepreneur is going to set up a new business.
• Competitive advantage: an advantage a business has over its rivals that is unique and sustainable.
• Consumer: someone who buys and uses goods and services.
• Convenience: a product or service's ability to fit in well with a customer's lifestyle or routine, the ease with which it can be used and/or its easy-to-reach location.
• Customer base: the clients who buy the products/services of a business, a proportion of whom are repeat customers.
• Demographics: relating to the structure of a population.
• Differentiate: show that a product is different from similar products.
• E-commerce: using the internet to carry out business transactions.
• Enterprise: a person or organisation with the purpose of producing goods and services to meet the needs of customers.
• Entrepreneur: someone who creates a business, taking on financial risks with the aim of making a profit from the business.
• E-tailing: retailing to customers through the internet, such as through an e-commerce website.
• Exports: the flow of goods and services out of a country and into another country.
• Imports: the flow of goods and services into a country from another country.