The difference between the actual output of a business and its break-even output.
Marginal costing
A costing method in which fixed costs are separated and the other costs (the marginal costs) are apportioned to products.
Overtrading
When a business has expanded in such a way that it lacks sufficient working capital and so suffers liquidity problems.
Payback
A method of investment appraisal which calculates the number of years it will take for the revenue of an investment to cover the original cost.
Preference shares
Part of the capital structure of a company. Holders are paid after debenture holders but before ordinary shareholders. The rights of preference shareholders vary from company to company and are laid down in the articles of association.
Pricing
The marketing function that decides on the appropriate price for a given product.
Profit and loss account
Accounting statement showing the profit a business has made over a given period of time and the way it has been used.
Purchasing
The business function concerned with the buying of raw materials and components.
Reserves
That part of owners’ capital which derives from undistributed profits. It is an item on the balance sheet of a company.
