29 - Business finance Flashcards

1
Q

Define start-up capital

A

the capital needed by an entrepreneur to set up a business

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2
Q

Define working capital

A

the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers

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3
Q

Define short-term finance

A

money required for short periods of time of up to one year

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4
Q

Define long-term finance

A

money required for more than one year

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5
Q

Define profit

A

the value of goods sold(revenue) less costs

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6
Q

Define liquidity

A

the ability of a business to pay its short-term debts

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7
Q

Define bankruptcy

A

the legal procedure for liquidating a business which cannot fully pay its debts out of its current assets

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8
Q

Define liquidation

A

when a business ceases trading and its assets are sold for cash to pay suppliers and other creditors

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9
Q

Define current assets

A

assets that either are cash or likely to be turned into cash within 12 months

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10
Q

Define current liabilities

A

debts that usually have to be paid within one year

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11
Q

Define capital expenditure

A

is money spent on fixed assets such as factories and machinery, these items are used for the long term

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12
Q

Define revenue expenditure

A

the money spent on everyday running costs of the business such as raw material and components of products

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13
Q

Define internal sources of finance

A

raising finance from the business’s own assets or from profits left in the business

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14
Q

Define external sources of finance

A

raising finance from outside the business, for example banks

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15
Q

Define retained earnings

A

profit after tax retained in a company rather than paid out to shareholders as dividends

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16
Q

Define non-current assets

A

assets kept and used by the business for more than one year

17
Q

Define overdraft

A

a credit that a bank agrees can be borrowed by a business up to an agreed limit as and when required

18
Q

Define Debt factoring

A

selling of claims over trade receivabled to a specialist organisation in exchange for immediate liquidity

19
Q

Define hire price

A

a company purchases an asset and agrees to pay fixed repayments over an agreed time period. the asset belongs to the purchasing company once the final payment has been made

20
Q

Define leasing

A

obtaining the use of an asset and paying a leasing charge over a fixed period, avoiding the need to raise long-term capital to buy the asset. the asset is owned by the leasing company

21
Q

Define long-term loans

A

loans that do not have to be rapid for at least one year

22
Q

Define debentures (loan stock or corporate bonds)

A

long-term bonds issued by companies to raise debt finance, often with a fixed rate of interest

23
Q

Define share capital

A

permanent finance raised by companies through the sale of shares

24
Q

Define business mortgages

A

long-term loans to companies purchasing a property for business premises, with the poperty acting as collateral security on the loan

25
Define venture capital
risk capital invested in business startups or expanding small businesses that have good profit potential but do not find it easy to gain finance from other sources
26
Define collateral security
an asset which a business pledges to lender and which must be sold off to pay a debt if loan is not repaid
27
Define rights issue
existing shareholders are given to buy additional shares at a discounted price
28
Define microfinance
providing financial services for poor and low-income customers who do not have access to the banking services, such as loans and overdrafts, offered by traditional commercial banks
29
Define crowd funding
the use of small amounts of capital from a large number of individuals to finance a new business venture