5. Financial Information & Decisions Flashcards
Start-up capital
the finance needed by a new business to pay for essential non- current and current assets before it can begin trading
Working capital
the finance needed by a business to pay for its day-to-day activities
Capital expenditure
money spent on non-current assets which will last for more than one year
Revenue expenditure
money spent on day-to-day expenses which do not involve the purchase of a long-term asset, for example, wages or rent
Internal finance
obtained from within the business itself
External finance
obtained from sources outside of and separate from the business
Micro-finance
providing financial services - including small loans - to poor people not served by traditional banks
Crowdfunding
funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the internet
Cash flow
the cash inflows and outflows over a period of time
Cash inflow
the sums of money received by a business during a period of time
Cash outflow
the sums of money paid out by a business during a period of time
Cash flow cycle
the stages between paying out cash for labour, materials, and so on, and receiving cash from the sale of goods
Profit
the surplus after total costs have been subtracted from revenue
Cash flow forecast
an estimate of future cash inflows and outflows of a business, usually on a month-by-month basis. This then shows the expected cash balance at the end of each month
Net cash flow
the difference, each month, between inflows and outflows.
Closing cash (bank balance)
the amount of cash held by the business at the end of each month. This becomes next month’s opening cash balance.
Opening cash (bank balance)
the amount of cash held by the business at the start of the month
Working capital
the finance needed by a business to pay for its day-to-day expenses
Account
the financial records of a firm’s transactions
Final account
produced at the end of the financial year and give details of the profit or loss made over the year and the worth of the business
Income statement
a financial statement that records the income of a business and all costs incurred to earn that income over a period of time. It is also known as a profit and loss account
Revenue
the income to a business during a period of time from the sale of goods and services
Cost of sales
the cost of producing or buying in the goods actually sold by the business during a time period
Gross profit
made when revenue is greater than the cost of sales
Trading account
shows how the gross profit of a business is calculated
Net profit
the profit made by a business after all costs have been deducted from revenue. It is calculated by subtracting overhead costs from gross profits
Depreciation
the fall in the value of a fixed asset over time
Retained profit
the net profit reinvested back into the company, after deducting tax and payments to owners, such as dividends
Statement of financial position
shows the value of a business’s assets and liabilities at a particular time
Asset
those items of value which are owned by the business. They may be non- current (fixed) assets or currents assets
Liabilities
debts owed by the business. They may be non-current liabilities or currents liabilities
Non-current asset
items owned by the business for more than one year
Current asset
owned by the business and used within one year
Non-current liabilities
long-term debts owed by the business, repaid over more than one year
Current liabilities
short-term debts owed by the business, repaid in less than one year
Capital employed
shareholders’ equity + non-current liabilities and is the total long-term and permanent capital invested in a business
Liquidity
the ability of a business to pay back its short-term debts
Profitability
the measurement of the profit made relative to either the value of sales achieved or the capital invested in the business
