2.1 key terms

Question 1

Define retained profit

Answer 1

the amount of money a business has left over after all costs have been covered

Question 2

Define sale of assets

Answer 2

When a company sells all or some of its assets. Assets can include: machinery, inventory, building etc

Question 3

Define peer-to-peer funding

Answer 3

the practice of lending to individuals or businesses through online services that match lenders with borrowers

Question 4

Define business angels

Answer 4

Extremely rich individuals who provide capital to high risk, small business ventures or start-ups, e.g. Dragon’s Den

Question 5

Define crowdfunding

Answer 5

allowing small investors to find business start-ups in which they are willing to invest through a crowdfunding website

Question 6

Define share capital

Answer 6

the money a business receives through the issuing and selling of shares

Question 7

Define venture capital

Answer 7

A form of capital provided by venture capital firms to small, emerging business who have been deemed to have high growth potential, in exchange for a share stake in the business

Question 8

Define leasing

Answer 8

an arrangement between the lessor (owner) and the lessee (user) whereby the lessor purchases an asset for the lessee and allows him to use it in exchange for periodical payments called lease rentals

Question 9

Define overdraft

Answer 9

A deficit bank account caused by drawing more money than the account holds

Question 10

Define trade credit

Answer 10

the loan extended by one trader to another, when goods are bought on credit, it facilitates the purchase without immediate payment

Question 11

Define a grant

Answer 11

non-repayable funds given by the government or other organisation for a particular purpose

Question 12

Define business plans

Answer 12

An essential document for start-ups looking to attract finance. A good business plan outlines all aspects of the business in lots of detail, such as marketing strategy, financial objectives, aims for the business etc

Question 13

Define stakeholders

Answer 13

Anyone with an interest or a relation to a business, e.g. customers, owners, managers, employees etc

Question 14

Define cash flow forecast

Answer 14

A document that predicts cash inflows and outflows and should them be able to determine the cash funds a business has at any one time.

Question 15

Define limited liability

Answer 15

the liability of a company’s shareholders is detached from the company. Shareholders can lose their investment in the event of financial difficulty, but their personal belongings are safe. They are not liable for any debts the business incurs