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

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

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

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

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

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

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

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.