Glossary
BTEC Level 3 Business Studies. Unit 7: Business Decision Making
Break-even chart - A graphical representation of total costs, total revenue and the break-even point.
Break-even point - The level of output at which total costs equal total revenue.
Cash flow forecast - A prediction of the inflows and outflows of a business across a period of time in the future.
Closing balance - Net cash flow + opening balance
Closing stock - Unsold inventories left at the end of the trading period that will be carried over as opening stock in the next.
Cost of goods sold - The cost of the inventory that was sold during a trading period.
Current assets - Items that add value to a business which can or will be converted into cash within one year.
Current liabilities - Debts of the business that must be paid within 12 months.
Dividends - Sums of money paid to shareholders out of profits after a proportion has been reinvested.
Expenses - Costs that are not directly related to production but are necessary for the operation of the business.
Financial forecasts - Projections of estimated revenues, expenditures, profits and losses in the future.
Fixed cost line - The horizontal line representing costs that do not vary with output such as rent and salaries.
Gross profit = Revenue - cost of goods sold
Income statement - A document produced by a business to record revenues, costs, profits and losses over a period of time.
Inflows - Money coming into the business from sources such as cash sales, credit sales and loans.
Margin of safety - The difference between actual output and the break-even point.
Net assets - The sum of everything the business owns minus everything it owes.
Net cash flow = Inflows - outflows
Net profit = Gross profit - expenses
Non-current assets - Items owned by the business that are not easily turned into cash and therefore will not be converted into cash within an accounting year.
Non-current liabilities - The value of debts of the business that will be payable after more than one year.
Opening balance - closing balance of previous month. For a new business, opening balance may be zero unless otherwise stated.
Opening stock - Inventories that the organisation has at the start of the trading period, carried over from the previous trading period.
Ouflows - Money leaving the business
Purchases - Inventories bought during a trading period.
Retained profit - The amount of a businesses profits that are reinvested instead of distributed to shareholders.
Sales forecast - Estimates of future revenue by anticipating how much product or service a business will sell.
Sales revenue - The money received from selling goods and services. (P X Q)
Statement of financial position - A document that reports a snapshot of a firms financial position including asset and liability values on a specific day.
Total cost line - The line that represents fixed costs + variable costs
Total revenue line - The line that represents price x quantity
Variable costs - Costs that change when output changes for example raw materials and packaging costs.