Business Aims & Objectives

1.3 Business Aims & Objectives

• Market Share: The proportion of sales in a market taken by one business.
• Profit: The amount of revenue left over after deducting costs.
• Social Objective: Likely to be non-financial, such as reducing carbon emissions or improving the quality of life for a local community.
• Financial Objectives: Targets expressed in money terms, like profit, building wealth, or survival.
• Non-Financial Objectives: Personal objectives of entrepreneurs, such as personal satisfaction, challenge, or independence.

1.3B Business Revenues, Costs & Profits

• Revenue: The income a business receives from sales.
• Income Stream: The source of regular income for a business.
• Viable: Capable of succeeding.
• Fixed Costs: Do not change regardless of production volume.
• Variable Costs: Change depending on production volume.
• Total Costs: Fixed costs plus variable costs.
• Income Statement: A financial statement showing income and expenses over a period, resulting in profit or loss.
• Stakeholder: Anyone with an interest in a business's activities.
• Cost of Sales: Costs directly involved in production (e.g., stock).
• Expenses: Costs indirectly involved in production (e.g., electricity, salaries).
• Break-Even Point: The point where a business's revenue matches its total costs.
• Margin of Safety: The amount sales can fall before reaching the break-even point.

1.3C Cash & Cash Flow

• Cash Flow: The way money flows into and out of a business.
• Positive Cash Flow: More money coming in than going out.
• Negative Cash Flow: Less money coming in than going out.
• Credit: The amount of money a financial institution or supplier allows a business to use, which the business must repay later.
• Overheads: Fixed costs related to running an office, shop, or factory.
• Insolvent: A business unable to pay its debts.
• Consumables: Items used up regularly (e.g., pens, paper).
• Cash Inflows: Money entering the business.
• Cash Outflows: Money leaving the business.
• Net Cash Flow: The difference between inflows and outflows.
• Opening Balance: The amount of money in the bank at the start of a period.
• Closing Balance: The amount of money in the bank at the end of a period.

1.3D Sources of Business Finance

• Overdraft: A bank facility that allows borrowing money at short notice.
• Trade Credit: A credit arrangement offered by suppliers.
• Personal Savings: Money saved by the entrepreneur.
• Venture Capital: Money lent by large businesses to startups or entrepreneurs.
• Share Capital: Money invested in a business by shareholders.
• Loans: An amount of money lent with interest.
• Retained Profit: Money a business keeps rather than distributing to shareholders.
• Crowdfunding: Obtaining funds from a large number of people, each contributing a small amount.

1.3E Finance - Key Calculations

• Revenue: Price x Quantity Sold.
• Total Variable Costs: Variable cost x Quantity Sold.
• Total Costs: Fixed Costs + Total Variable Costs.
• Gross Profit: Sales Revenue - Cost of Sales.
• Net Profit: Gross Profit - Other Operating Expenses & Interest.
• Interest (%): (Total Repayment - Borrowed Amount) / Borrowed Amount x 100.
• Contribution: Price - Variable Costs.
• Break-Even Point: Fixed Costs / (Price - Variable Costs).
• Margin of Safety: Actual or Budgeted Sales - Break-Even Sales.
• Net Cash Flow: Cash Inflows - Cash Outflows.