Accounting And Finance Flashcards
Accounting concepts
Financial -profit, levels of cash
Management - concentrates on internal financial accounts
Sources of finance
Retained profit
Bank loan
Bank overdraft
Trade credit
Break even
Point were costs and income are equal and is no profit or loss
Direct costs
Also known as variable costs (raw materials)
Indirect costs
Fixed costs
Difference between fixed and variable costs
Costs don’t vary (rent) whereas variable is cost of making product (raw materials)
Margin of safety
Number of units that business is over the break even point
Budget
Plan of future concerning the revenues
Variance
Difference between actual result and budget
Investment appraisals
Analysis to consider the profitability of an investment
Payback period
Time taken for project to repay its initial investment
Net present value
how much investment is worth throughout lifetime, discounted to todays value
Overhead costs
not directly related to the production of goods or services
Stepped fixed cost
cost that doesn’t change within certain high and low thresholds of activity, will change if threshold is breached
Average rate of return
average profit from investment
Cash flow
measurement of amount of cash that comes into and out of business in particular period of time
Difference between cash flow and profit
cash flow, flows in and out of business within a period of time. profit is what remains from your revenue after costs are deducted
Working capital
money available to meet current or short term obligations
Income statement
shows company revenue, expenses and profitability
Depreciation
estimated reduction in value of a fixed assets
Statement of financial position
used to assess the position of a business in terms of financial stability
Liquidity ratio
use to work out if a company can repay creditors from the total cash they have available.
Gross profit margin
what business made after paying for direct cost of doing business
Return on equity
measure of company’s financial performance shows relationship between company’s profit and investor’s return
Return on capital employed
financial ratio can be used to assess company’s profitability and capital efficiency
Gearing
relationship or ratio of companies debt to equity
