2 - finance

• Revenue - cost of sales = gross profit
• Gross profit - expenses = net profit
• How do you calculate net profit margin?

  (net profit/sales) x 100
• How do you calculate gross profit margin?

  (Gross profit/sales) x 100
• revenue = number sold x selling price
• how do you calculate average annual net income ?

  profit - cost of investment / years
• How do you calculate average rate of return?

  (average anual income/cost of investment) x 100
• Fixed costs / selling price - variable costs = break even point
• What is retained profit?

  profit that is reinvested into the business
• Margin of safety is the difference between a businesses break even output and actual output
• A cash flow forecast is a statement showing the expected flow of cash in and out of the business. It shows if a business can pay its debts
• What is share issue?

  money raised from investors by selling new shares in the business
• Break even quantity is the amount a business must sell in order to reach its break even point
• Liquidity is a businesses ability to pay bills
• Why do businesses need money?

  to start or grow the business
• What is average rate of return?

  a way of measuring the profitability of an investment over the lifetime of the investment
• Trade credit is when a business pays their suppliers at a later date
• Owners capital is money the owner has saved up and invested into the business
• What is crowdfunding ?

  money raised through an appeal to the public who then invest small amounts