Glossary of Terms - Unit 3

Select the link below to access an explainer video

The amount of units that need to be sold so that the revenue and costs are at the same level.  Calculated as Fixed costs divided by contribution per unit. 

E.g. if the fixed costs were £100 and the contribution per unit was £5 (100/5=20), you would need to sell 20 items to reach the break even point

Capital expenditure are funds used to acquire or upgrade physical assets such as property, buildings or equipment and also intangibles

Income that comes from the investors/owners of a business. This income is typically used to buy assets for the company like property or equipment. Sources of capital income include:

• loans
• mortgages
• shares
• owner's capital
• debentures.

The amount of contribution selling one unit will make towards breaking even. Calculated as Selling price - Variable cost per unit.

E.g. If you are selling each unit for £10, and they each cost £4 to make, you would do £10-£4=£6. This means that the contribution per unit is £6. 

Contribution per unit is also used to calculate the break even point

Debt factoring involves a business selling their invoices to a third party at a discounted price in order to bypass the hefty waiting times which are associated with invoice payments.

This means they receive the money they are owed quickly however it comes at a cost as the get a discounted amount from the debt factoring company.

Select the link below for an explainer about 'Depreciation'