Business Costs

Business Costs In a business there are three different types of business costs these costs are: Direct & Indirect Direct costs are expenses that can be attributed making a particular product such costs include factory labour, raw materials and operating machinery. Indirect costs are the general overheads of running a business for example; salaries, telephone bills and rent. Firms that make more than one product will want each one to earn enough sales revenue to cover its direct costs and make a contribution to indirect costs. If all the products together make enough contribution then the business will make a profit. Fixed & Variable Fixed costs are costs which do not vary. They are mostly indirect costs - Management salaries, telephone bills and office rent. They have to be paid even if the firm produces nothing. Variable costs are costs that cab change every time a bill etc... must be paid, these are mostly direct costs such as factory labour, raw material etc...Some costs are semi variable, they only vary slightly because they have a large fixed element, for example workers wages - most people receive a basic salaries and only part of their pay is linked to output. Fixed costs are usually only fixed over a short period of time, if a firm is expanding, it will take on more managers and rent more offices so the fixed cost will increase. A firm can work out their

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  • Level: GCSE
  • Subject: Business Studies
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Stock Market Crash

Stock Market Crash A stock market crash is a sudden decline of stock prices in stock markets. It usually happens due to panic among stockholders and various economic factors. These crashes usually occur after a long period of rising stock prices (due to going speculations), when P/E ratios are far above their averages. According to Benjamin Graham, the father of securities analysis, there are three main forces behind the market crash: the manipulation of stocks, the lending of money to buy stocks and excessive optimism. The most famous market crash, the Wall Street Crash of 1929, also known as Black Tuesday, happened on October, 29 1929. It is regarded as a start of the Great Depression. All of the three forces mentioned above contributed to this crash. American economy was blooming in the 1920s. NYSE was the largest stock market in the world. From 1920 till 1929 many stocks quadrupled in value. Thus, many people invested their money in stocks, expecting to gain profit. It led to speculative boom that took place in late twenties: the rising share prices were encouraging people to invest even more. Many of the investors had to borrow money to buy stocks but they only had to have 10% equity and 90% margin to buy securities. Speculations on stocks stimulated further price rises and created an economic bubble. The P/E ratios in 1929 were far

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  • Level: GCSE
  • Subject: Business Studies
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