1.3

Question 1

Financial Objectives

Answer 1

Targets or goals expressed in money terms such as making a profit, earning income or building market share.

Question 2

Non–Financial Objectives

Answer 2

Objectives that have nothing to do with money (a personal goal being achieved).

Question 3

Revenue

Answer 3

The amount of income received from selling goods or services over a period of time.The selling price x the number of goods sold.

Question 4

Sales Volume

Answer 4

The number of items or products or services sold by a business over a period of time.

Question 5

Fixed costs

Answer 5

costs that don’t change their price. For example : Rent, salaries, advertising.

Question 6

Variable Costs

Answer 6

Costs which change directly with the number of products made by a business such as the cost of buying raw materials.
Number of units sold X variable costs per unit

Question 7

Total Costs

Answer 7

All costs of a business.

Fixed Costs + Variable Costs

Question 8

Cash

Answer 8

Notes, coins and cash in the bank.

Question 9

Cash Flow

Answer 9

The flow of cash in and out of a business.

Question 10

Cash Inflow

Answer 10

The Cash flowing into the business

Question 11

Cash Outflow

Answer 11

The cash flowing out of the business

Question 12

Net Cash Flow

Answer 12

Cash inflow - Cash outflow

Question 13

Cash Flow Forecast

Answer 13

A forecast or estimate of future cash inflows and cash outflows.

Question 14

Cash Flow Statement

Answer 14

A historical document showing the cash inflows and cash outflows of a business.

Question 15

Opening Balance

Answer 15

The amount of money in a business’s cash flow at the start of the month.

Question 16

Closing Balance

Answer 16

The amount of money in a business’s cash flow at the end of the month.

Question 17

Business Plan

Answer 17

A plan for the development of a business giving forecasts of items such as sales, costs and cash flow.

Question 18

Long-term Finance

Answer 18

Sources of money for businesses that are borrowed or invested for more than a year e.g. mortgage, loan.

Question 19

Short-term Finance

Answer 19

Sources of money for a business that may have to be repaid immediately or fairly quickly, e.g. overdraft, trade credit, usually within a year.

Question 20

Share

Answer 20

A part ownership in a business; for example a shareholder owning 25% of shares in a business owns a quarter of the business.

Question 21

Share Capital

Answer 21

The value of a company which belongs to its shareholders.

For example if 5 people each invest £10,000 into a business, the share capital is 5 x £10,000 = £50,000

Question 22

Shareholders

Answer 22

The owners of a company.

Question 23

Venture Capitalist

Answer 23

An individual or company which buys shares in what they hope will be a fast growing company with a long-term view of selling the shares at a profit.

Question 24

Loan

Answer 24

Borrowing a sum of money which has to be repaid with interest over a period of time, such as 1-5 years.

Question 25

Security

Answer 25

Assets owned by a business which are used to guarantee repayments of a loan. Also known as collateral.

Question 26

Mortgage

Answer 26

A loan where a property is used as security.

Question 27

Dividend

Answer 27

A share of profits of a company received by shareholders who own shares.

Question 28

Retained Profits

Answer 28

Profit which is kept back in the business and used to pay for investment in the business.

Question 29

Overdraft

Answer 29

Borrowing money from a bank by drawing more money than is actually in a current account.
Interest is charged on the amount overdrawn.