A: total revenue B: total costs C: varible costs D: fixed costs E: break even F: profit G: loss Break-even: Contribution: the amount of money left after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit. Profit: total revenue – total costs Total contribution total revenue – total variable costs Contribution per unit: selling price – variable costs Breakeven output: the output a business needs to produce so that its total revenue and total costs are the same Breakeven = Fixed costs/ contribution per unit Margin of safety: the range of output between the break-even and the current level of output, over which a profit is made Margin of safety: Current level of output – breakeven of output Using online retailing enables ASSP to reach a wider target audience, this is because ASSP sell a niche market product that will only apply to people with breathing difficulties this will allow ASSP more chance to quickly achieve dominant in this market by attracting national or international customers therefore ASSP are able to compete as they will be established early with first moves advantage in this rapidly expanding market However competition could be an issues to ASSP as they would already have established web searcher dominance meaning they will come up first when you search breathing salts. Another benefit of using online retailing is that it is easier to set up because making a web site is much easier than opening a retailing outlet this would lead to Anthony having more time to differentiate his products from his competition and this would therefore mean he would be at a better advantage when entering the market and the barrier to entry will be much less of a threat However there may be a lack of technical skills as anothys background dosent suggest that he has tenical skills Forms of ownership and franchises PLC LTD partnership Sole trader Other forms of business: Franchise: a business model in which a business (the franchisor) allows another operator (the franchises) to trade under their name. They will have access to their logo , products, support and marketing Lifestyle business: a business set up in the aim of sustaining particular level of income Social enterprise: businesses with social objectives Online business: a business that is online, has no physical stores franchisor: benefit: spread the brand name, some percentage of profits form franchisor drawback: ruin brand image franchisee: benefit: drawback: have to follow the rules of the franchisor Breakeven Breakeven analysis is used to determin price increase, new product and oursourcing Breakeven 8 marker: Breakeven = fixed costs / contribution per unit One strength of using break even analysis is it helps a business to determine how many units of a cetin product must be sold in order to make nor a profit nor a loss, this would lead to the business being able to show investors that their investment would start to see a return after a certain amount of time, therefore a business would be able to attract investors. However breakeven analysis is only relevant to one product meaning a business such as supermarkets would have to make a breakeven analysis on every product which is unrealistic and only a prediction On the other hand, breakeven analysis can be seen as a weakness because it assumes fixed costs will stay the same, this is a weakness because fixed costs may not fluctuate however they can increase for example a land lord may decide to put the rent up Budgets Budget: financial plan looking at revenue and costs of a business Control Efficiency Co-ordination Motivation Planning Historical Zero based Variance: difference between what we have budgeted and the actual amount Favourable: in the businesses favour (lower or same as expected) Adverse: not in the business favour (higher than expected) F A A F 143,370-12,250 = 2,120 5890- 4210 = 1,680 1680-2120= £440 f Total revenue – total costs £2,750 - £1,200 = £1550 £3,000 - £2,080 = £920 £2060 – 1800 = £260 2100 = 2000 = 4100 = £4300 8400 Gross profit = total revenue – costs of sales Revenue = price x quantity Operating profit = gross profit – expenses Net profit = operating profit – interest (+ tax) Gross profit margin = gross profit / total revenue x100 Operating profit margin = operating profit / total revenue x100 Net profit margin = net profit / total revenue x100 Liquidity Balance sheet: a snapshot of a business’s financial position at a particular point in time Liquidity: ease of turning assets into cash Poor cashflow = struggle to pay debtors Current: within 12 months Non-current: more than 12 months Current ratio: current assets/ current liabilities 1.5:1-2:1 Acid test ratio: current assets – inventory / current liabilities 0.75:1-1 Working capital (net current assets) = current assets - current liabilities The amount of money needed to pay for day-to-day operations Improve liquidity: Overdrafts Loans Sale & lease back Sell stock Only make essential purchases Extend credit Sell unused assets Liquidity: refers to the ease of turning assets into cash. Liquidity is important to CMR because versius is expensive and the business needs to make sure they are able to pay back loans this can this is because loans have high interest rates and the longer the business takes to pay it back the larger it gets poor liquidity could also cause loaners to take colleterial for the inability to pay the loan back, therefore liquidty is important for CMR to gain acsess to loans However CMR probally wouldn’t need to get loans due to rasing £75 million in share capital showing that getting and paying back loans isn’t an issues for CMR On the other hand liquidity may not be important to CMR due to it having a sufficient working capital of 14 billion, this means they have 14 billion for day to day operstions Gearing noncurrent liabilities / capital employed x100 Capacity utilisation: The use that a business makes of its resources 20 marker Capacity utilisation is the use that a business makes of its resources. One benefit of high-capacity utilisation on employees is that they will feel like they have job security. This is because there will be plenty of work to meet growing demand as sales for Lindt rise by 9.6%. This leads to staff feeling more motivated as their physiological needs are met. Therefore, production levels high for Lindt as staff work more effectively. However, employees will become lazy over time as they become too comfortable and secure as they know that Lindt can’t afford to lose them to keep up with demand in a growing market. Another benefit of high-capacity utilisation on employees is that they will feel more motivated as there are opportunities to work overtime and move up the organisation structure. This is because as the business experiences a growing demand the business is likely to expand to meet it meaning there may be opportunities to be internally promoted as well as work overtime when they are short staffed. This leads to employees working more efficiently as they try and stand out in the production role, therefore improving efficiency and potentially quality for Lindt. However, this will be costly for Lindt to maintain as overtime becomes expensive as well as expansion plans being costly and time consuming. One drawback of high-capacity utilisation on employees is that they are likely to become overworked. This is due to staff being extensively used especially when working overtime when trying to meet the high output level Lindt has within their $1.23 bn revenue across the market. This leads to high levels of absentees as staff feel overwhelmed and over worked, therefore causing productivity and other staff problems. However, Lindt have high retained profits which they can reinvest into hiring new staff to distribute the work load and still meet rising demand. Another drawback of high-capacity utilisation on employees is that labour turnover will increase. This due to staff feeling more like a cost to Lindt rather than an asset making them feel demotivated and not meeting their esteem needs 64.62 70 2304 Burt’s Crisps In conclusion I think burst should expand, this is because they are highly liquid meaning they would have enough cash to aid there expansion, this would allow burts to try and out compete competitors however this depends on the ability paying off the debts nut due to their high liquidity they should be able to pay of these debts, most importantly this depends on them continuing on increasing there profitability as this is important to have retained profits, pay off debts and be able to grow.
