Edexcel A Level Business: Paper 2 (Advanced Information) ALL SOLUTION LATEST 2023 EDITION GUARANTEED GRADE A+

Break Even When a business generates just enough revenue to cover its total costs Break-Even Point the point at which the costs of producing a product equal the revenue made from selling the product Contribution The amount of money left over after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit. Margin of Safety the range of output between the break even level and the current level of output, over which profit is made. Contribution per Unit Selling price - variable cost per unit Break Even Formula Fixed costs / contribution per unit Total contribution Contribution per unit x number of units sold Fixed Costs Costs that do not vary with the quantity of output produced Variable Costs costs that vary with the quantity of output produced Total Revenue the total amount of money a firm receives by selling goods or services Total Costs fixed costs + variable costs Profit what remains after all business expenses have been deducted from sales revenue Budget An agreed upon forward financial plan Budgetary Control A business system that involves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences Historical Figures Quantitative information based on past trading records Production Cost Budget A firm's planned production costs for a future period of time Sales Budget A firm's planned sales for a future period of time - can be measured in terms of volume or revenue Variance the difference between actual financial outcomes and those budgeted Variance Analysis The process of calculating variances and attempting to identify their causes Zero-based budgeting A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder Amortisation The writing off of an intangible asset Cost of Sales The direct costs of a business Exceptional Costs A one off cost, such as a large bad debt Gross Profit the difference between sales revenue and cost of goods sold Operating Profit The difference between gross profit and business overheads, such as selling and administrative expenses. E.g. Gross profit - expenses Operating profit margin Operating profit / sales revenue x 100 Profit for the year (net profit) Operating profit - interest and taxation Profit for the Year Margin (net profit margin) Net profit / revenue x 100 Statement of Comprehensive Income A financial document showing a company's income and expenditure over a particular time period, usually one year Turnover the total income of a business resulting from the sales of goods and services Cash v Profit Cash is the amount of money actually available in your bank account to spend, whilst profit is a paper-value that might not be realised as a result of defaults and bad debts. Gross Profit Margin Gross profit/sales revenue x 100 Liquidity the ease with which an asset can be converted into cash Acid Test Ratio (Current Assets - Inventory) / Current Liabilities Current Ratio current assets divided by current liabilities Assets resources owned by a business Capital money put into the business by the owners Current Assets cash and other assets expected to be exchanged for cash or consumed within a year Current Liabilities debts of the business that must be paid within the next year Intangible Assets long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value Inventories stocks of goods held to satisfy future sales. They can include raw materials, work-in-progress and finished goods. Liabilities Amounts owed to creditors such as banks and suppliers Net Assets total assets - total liabilities Non-Current Assets Long-term resources that will be used by the business repeatedly over a period of time (usually more than a year) Non-current liabilities Money owed by the business for more than one year, sometimes called long-term liabilities Shareholders' Equity the total amount owed by the business to the shareholders. Statement of financial position (balance sheet) A summary at a particular point in time of the value of a firm's assets, liabilities and capital Trade and Other Payables Money owed by the business to suppliers and utilities, for example. Sometimes called trade creditors Trade and other receivables Money owed to the business by customers and any prepayments made by the business Working Capital The money required to finance the day-to-day operations of the business. It is calculated by current assets - current liabilities. Capacity Utilisation The use that a business makes of its resources Capacity utilisation formula Current output/maximum possible output x 100 Excess or surplus capacity When a business has too many resources, such as labour and capital, to produce its desired level of output Full Capacity The point where a business cannot produce any more output Mothballing Leaving machines, equipment or building space unused, but maintained, so they could be brought back into use if necessary Over-utilisation The position where a business is running at full capacity and 'straining' resources Rationalisation Reducing the number of resources, particularly labour and capital, put into the production process, usually undertaken because a business has excess capacity Under-utilisation The position where a business is producing at less than full capacity External Audit an audit of the external environment in which a business finds itself, such as the market within which it operates or government restrictions on its operations Internal Audit An analysis of the business itself and how it operates SWOT Analysis identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T) Trade Association an organization that represents firms within a particular industry PESTLE Analysis Analysis of the external political, economic, social, technological, legal and environmental factors affecting a business Monopoly a market dominated by a single seller Oligopoly A market structure in which a few large firms dominate a market Consolidation when large companies merge with each other or absorb other companies, forming even bigger companies. Centring A method used in the calculation of a moving average where the average is plotted or calculated in relation to the central figure Correlation The strength of a relationship between two variables. correlation coefficient A measure of the degree of relationship between two variables Moving Average A succession of averages derived from successive segments (typically of constant size and overlapping) of a series of values Scatter Graph A graph that shows the relationship between two related sets of data Time Series Analysis A type of forecast in which data relating to past demand are used to predict future demand. Line of Best Fit a line drawn in a scatter plot to fit most of the dots and shows the relationship between the two sets of data Seasonality A repeated pattern of spikes or drops in a time series associated with certain times of the year. random fluctuations These can occur at any time and will cause unusual and unpredictable sales figures - examples include exceptionally poor weather or negative public image following a high-profile product failure. Gearing Ratio Exploration of the capital structure of the business by comparing the proportions of capital raised by debt and equity Gearing Ratio Formula non-current liabilities/capital employed x 100 Profitability or performance ratios Illustration of the relative probability of a business Ratio Analysis A numerical approach to investigating accounts by comparing two related figures Return on capital employed (ROCE) The profit of a business as a percentage of the total amount of money used to generate it. ROCE formula Operating profit / capital employed x 100 CONTINUED..