1.3 Flashcards
Financial Objectives
Targets or goals expressed in money terms such as making a profit, earning income or building market share.
Non–Financial Objectives
Objectives that have nothing to do with money (a personal goal being achieved).
Revenue
The amount of income received from selling goods or services over a period of time.The selling price x the number of goods sold.
Sales Volume
The number of items or products or services sold by a business over a period of time.
Fixed costs
costs that don’t change their price. For example : Rent, salaries, advertising.
Variable Costs
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
Total Costs
All costs of a business.
Fixed Costs + Variable Costs
Cash
Notes, coins and cash in the bank.
Cash Flow
The flow of cash in and out of a business.
Cash Inflow
The Cash flowing into the business
Cash Outflow
The cash flowing out of the business
Net Cash Flow
Cash inflow - Cash outflow
Cash Flow Forecast
A forecast or estimate of future cash inflows and cash outflows.
Cash Flow Statement
A historical document showing the cash inflows and cash outflows of a business.
Opening Balance
The amount of money in a business’s cash flow at the start of the month.
Closing Balance
The amount of money in a business’s cash flow at the end of the month.
Business Plan
A plan for the development of a business giving forecasts of items such as sales, costs and cash flow.
Long-term Finance
Sources of money for businesses that are borrowed or invested for more than a year e.g. mortgage, loan.
Short-term Finance
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.
Share
A part ownership in a business; for example a shareholder owning 25% of shares in a business owns a quarter of the business.
Share Capital
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
Shareholders
The owners of a company.
Venture Capitalist
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.
Loan
Borrowing a sum of money which has to be repaid with interest over a period of time, such as 1-5 years.
Security
Assets owned by a business which are used to guarantee repayments of a loan. Also known as collateral.
Mortgage
A loan where a property is used as security.
Dividend
A share of profits of a company received by shareholders who own shares.
Retained Profits
Profit which is kept back in the business and used to pay for investment in the business.
Overdraft
Borrowing money from a bank by drawing more money than is actually in a current account.
Interest is charged on the amount overdrawn.
