6. Finance Flashcards
6.1 Key terms - entrepreneur
An entrepreneur is someone who is willing to take the risks involved in starting a new business.
6.1 Key terms - Inventories
Inventories are raw materials that have not yet been used or products that have been made, but not sold. These are also called stocks.
6.1 Key terms - internal source of finance
An internal source of finance is money that is available from within the business, for example, retained profits from previous years.
6.1 Key terms - Owners’ funds
Owners’ funds is money put into a business by its owner or owners.
6.1 Key terms - Interest
Interest is a payment made in order to borrow money. It means a business pays back more than it borrows.
6.1 Key terms - shareholder
A shareholder is a person or organisation that owns part of a company. Each shareholder owns a
‘share’ of the business.
6.1 Key terms - asset
An asset is something that is owned by a business. Examples include land, buildings, vehicles and machinery.
6.1 Key terms - Trade credit
Trade credit is a period of time which suppliers allow customers before payment for supplies must be made.
6.1 Key terms - external source of finance
An external source of finance refers to money that comes from outside the business, for example, a loan from a bank.
6.1 Key terms - collateral
Collateral is an asset that a bank holds as security for the repayment of a loan.
6.1 Key terms - Mortgages
Mortgages are loans from banks and building societies that are used to buy land and buildings, such as offices and shops.
6.1 Key terms - Building societies
Building societies are organisations that offer a range of financial services. However, their major business is providing savings accounts and lending money for the purpose of buying property.
6.1 Key terms - overdraft
An overdraft is a flexible loan which businesses can use, whenever necessary, up to an agreed limit.
6.2 Key terms - Cash flow
Cash flow is the money that flows into and out of a business on a day-to-day basis.
6.2 Key terms - cash flow forecast
A cash flow forecast is a plan of the expected inflows and outflows to and from a business over a period of time.
6.2 Key terms - cash flow statement
A cash flow statement is a record of the cash inflows and outflows that took place over an earlier period of time.
6.3 Key terms - Revenue
Revenue is the income that a firm receives from selling its goods or services. It is also referred to as ‘turnover’. It is measured by the number of units sold multiplied by the price.
6.3 Key terms - sales
Sales refers to the number of products sold by a business.
6.3 Key terms - Costs
Costs are the spending that is necessary to set up and run a business.
6.3 Key terms - Fixed costs
Fixed costs are those costs that do not change when a business changes its output.
6.3 Key terms - Variable costs
Variable costs are the costs that vary directly with the business’s level of output.
6.3 Key terms - Total costs
Total costs are fixed costs plus variable costs.
6.3 Key terms - Profit
Profit measures the difference between the values of a business’s revenue (sales) and its total costs.
6.3 Key terms - Loss
Loss is the amount by which a business’s costs are larger than its revenue from all sales.
