Edexcel Business A Level Revision

When a business makes a profit it usually results in a similar cash inflow – but not always, and not straightaway! It is important to understand the basic reasons why net profit and net cash flow might not always be the same. Profit and cash flow are two different calculations – as shown above. There are two main ways in which net cash flow differs from net profit during any accounting period: (1) Timing differences These arise because a business may not received cash straightaway from a customer and it may also delay payment for its costs. For example, a customer may buy goods for £50,000 but be allowed to pay for those goods in 60 days. (2) The way that fixed assets are accounted for Fixed assets are the assets that a busines...

Profit - surplus of revenue when costs are covered Gross profit -  Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. Operating profit -  Records how much profit has been made in total from the trading activities of the business before any account is taken of how the business is financed. Statement of comprehensive income - A formal financial document that summarises a business' trading activities and expenses to show whether it has made a profit or loss. Profit margin - tells the business just what percentage of its turnover is actually profit. It is the ratio of profit to sales revenue as a percentage PROFIT = TOTAL REVENUE - TOTAL COSTS There are 3 types of profit; Gro...

Sales volume - The amount of sales expressed as a number of units sold Sales revenue - is the amount of sales expressed as the total sum of money spent by consumers. Revenue is the money coming in from the sale of goods and services. Fixed costs - Fixed costs do not change as output varies.  In other words, they are fixed even if output moves up or down from period to period. Variable costs - Costs which change when output changes are called “variable costs” Total costs - Fixed costs + Variable costs Sales volume =Sales revenue / Selling price Sales revenue = selling price x quantity sold Total variable costs = number of units sold x variable cost per unit Total costs = Fixed costs + variable costs     This is what fixed, variable, total costs and revenue would look like on a graph   1) Revenue  Increases with the amount of units sold and therefore starts at 0 and slopes upwards when shown on a graph. 2) Fixed Costs  Fixed ...