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| Balance sheet | is a legally required document showing a firm's assets, liabilities and capital. This must be produced at least once a year and shows how much a business would be worth if all its assets were to be sold. |
| Break even point | occurs where total cost is equal to total revenue, where the TR line crosses the TC line. Break even charts show how much profit or loss a firm can expect under differing circumstances and so improve their decision making |
| Capital employed | is the value of all the buildings, machinery and equipment used in producing the goods or services made by the business. |
| Creditors | are people to whom the business owes money e.g. suppliers. |
| Current assets | are those which the firm will turn into cash within the next year, e.g. stocks, debtors, money in the bank. |
| Current liabilities | are short term liabilities such as loans that have to be paid within one year. |
| Debtors | are people that owe the business money e.g. customers who have not paid their bills |
| External sources of finance | provide funds that come from outside the business, e.g. a bank loan, overdraft facility, mortgage or share capital. |
| Fixed assets | are those which will stay in the business for more than one year to produce goods and services, e.g. buildings, machinery etc |
| Fixed costs | are costs which remain the same as output increases, e.g. rent, loan repayments and salaries of managers. Fixed costs are also known as overheads. |
| Gross profit | is sales revenue minus the costs of production (cost of sales). |
| Internal sources of finance | are funds that come from inside a business, e.g. retained profits or selling an asset. |
| Long term liabilities | are those debts which do not have to be paid in the next year, e.g. a mortgage |
| Net profit | means the same as operating profit |
| Operating profit | is gross profit minus overheads (expenses). |
| Profit | is total sales revenue minus total cost. Profit is the reward for taking risks. |
| Profit and loss account | shows all of a firms revenues and costs over a period of time, usually one year, and how much profit/loss has been made |
| ROCE | is net profit divided by capital employed. This gives an idea of how successful the business has been in spending its money on equipment and factories. |
| Sales revenue | is the number of items sold multiplied by the selling price. |
| Shares | can be used to raise finance. A new issue of shares will increase the amount of capital available to the business. This money does not have to be paid back but the shareholders will expect a dividend |
| Total costs | are fixed costs together with variable costs. |
| Variable costs | are costs which increase as output increases, e.g. raw materials, overtime payments. |
