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M92 > Accounting principles & Practices > Flashcards

Accounting principles & Practices Flashcards

1
Q

What is liquidity?

A

The amount of cash which a business has or has access to

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2
Q

What is a non-current asset?

A

Property, equipment, investments

Intended to be kept for more than one year

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3
Q

What is a current asset?

A

Debtors and cash
Can be turned into liquid funds speedily)
Intended to be used in the next 12 months

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4
Q

What is working capitol?

A

The difference between current assets and current liabilities
Used to finance the day to day trading like wages, bills, raw materials
Known as net currents assets

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5
Q

Why might a company have a decreasing working capitol?

A

Poor management
A short term problem
Successfully growing the business

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6
Q

What is solvency?

A

A measure of a company’s assets compared to liabilities

If liabilities exceed assets then insolvent

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7
Q

Who requires a solvency margin?

A

The PRA

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8
Q

What is regulatory capitol?

A

The sum of equity and long term debt

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9
Q

What is an asset?

A

A resource that will provide benefit

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10
Q

A tangible asset?

A

Physical or real asset like cash, buildings, machinery or investments

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11
Q

An intangible asset?

A

Not physical like a trademark, a copyright, or goodwill.

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12
Q

What is a liability?

A

A present obligation arising from past events (or an amount owed)

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13
Q

What is equity?

A

Assets - liabilities

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14
Q

Who is required by law to produce financial statements?

A

All listed companies

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15
Q

What is the balance sheet?

A

A statement of the net wealth of a business

At a particular time

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16
Q

What is a current liability?

A

Money that has to be paid in less than 12 months like bank overdraft or trade creditors

17
Q

What is a non current liability?

A

Does not have to be paid within 12 months like bank loans, mortgages and bond issues

18
Q

Examples of long term sources of finance?

A

Share capitol or reserves (profits from the business held back and reinvested into the business)

19
Q

What is assets employed?

A

Non current assets + working capitol (which is net current assets)

20
Q

What is the income statement?

A

Shows the amount of profit or loss a company made in the last financial year

21
Q

What is gross profit?

A

Turnover - cost of sales

Costs should be matched against revenues generated already so unsold stock is not included as a cost

22
Q

What is revenue?

A

Total value of all sales (ex vat) invoices during the year

Can be called turnover

23
Q

What is the cost of sales?

A

Cost of stock bought during the year that has been subsequently sold
Doesn’t include money spent on stock that is yet to be sold

24
Q

GWP?

A

Premium before reinsurance is extracted

GWP is gross of commission but net of IPT

25
Q

Net written premium?

A

GWP - reinsurance

M92 (5 decks)

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