2.3 Managing finance Flashcards
amortisation
the writing off of an intangible asset
cost of sales
the direct costs of a business
exceptional costs
a one-off cost, such as a large bad debt
gross profit
the difference between revenue and cost of sales
gross profit margin
gross profit expressed as a percentage of revenue
operating profit
the difference between gross profit and business overheads, such as selling and administrative expenses
operating profit margin
operating profit expressed as a percentage of revenue
net profit
the difference between operating profit and interest and exceptional items such as taxation
net profit margin
net profit before tax, expressed as a percentage of revenue
statement of comprehensive income (profit and loss account)
a financial document showing a company’s income and expenditure over a particular time period, usually one year
revenue/turnover
the total income of a business resulting from sales of goods or services
current ratio
assesses whether or not a business has enough resources to meet any debts that arise in the next 12 months, it is found by dividing current liabilities into current assets
acid test ratio
silmilar to the current ratio but excludes stocks from current assets, a more severe test of liquidity
assets
resources that belong to a business
capital
money put into the business by the owners
current assets
liquid assets, i.e. those assets that will be converted into cash within one year
current liabilities
money owed by the business that must be repaid withi one year
intangible assets
non-physical assets, such as brand names, patents and customer lists
inventories
stocks, such as raw materials and finished goods held by a business
liabilities
money owed by the business to banks and suppliers, for example
liquidity
the ease with which assets can be converted intocash
net assets
total assets take away total liabilities
non-current assets
long-term resources that will be used by the business repeatedly over a period of time
non-current liabilities
money owed bu the business for more than one year, sometimes called long-term liabilities
shareholders’ equity
the amount of money owe by the business to the shareholders
statement of financial position (balance sheet)
a summary at a particular point in time of the value of a firm’s assets, liabilities and capital
trade and other payables
money owed by the business to suppliers and utilities, for example
trade and other receivables
money owed to the business by customers and any prepayments made by the business
working capital
the funds left over to meet day-to-day expenses after current debts have been paid, it is calculated by subtracting current liabilities from current assets
administration
a failing business appoints a specialist to rescue the business or wind it up
external factors
factors beyond the control of businesses cause it to collapse
internal factors
factors that businesses are able to control cause it to collapse
overtrading
the situation where a business does not have enough cash to support its production and sales, usually because it is growing too fast
