Business Finance Flashcards
Asset
Is any item owned by a business that can generate an income for the enterprise
Capital
Is the money invested into a business either by its owners or by organisations such as banks
Non current assets
Are assets that a business expects to hold for one year or more eg vehicles
Short term sources of finance
Are needed for a limited period of time, normally less than a year
Long term sources of finance
Are those hat are needed over a longer period of time, usually over a year
Insolvency
Exists when a business debts exceed the assets available to pay them
Liabilities
Refers to the money owed by a business to individuals, suppliers and banks
Working capital
Is the cash a business has for its day to day spending
Current assets
Are items owned by a business that can be readily turned into cash. Eg cash, money owed by customers and stocks
Trade payables
Is the amount of money owed by a business to its suppliers for goods and services that have been received but not yet paid for
Trade receivables
The amount of money owed by a business customers for products that have been supplied for but not yet paid for
Revenue expenditure
Refers to the purchase of items as fuel and raw materials that will be used up within a short space of time
Capital expenditure
Is the spending by a business on non current assets such as premises, production equipment and vehicles
A statement of financial position
Is a financial statement that records the assets and liabilities of a business on a particular day at the end of an accounting period ( balance sheet )
Income statement
Is a financial statement showing a business sales revenue over a trading period and all the relevant costs incurrent to generate that revenue
Internal sources of finance
Ones that exist within the business
External sources of finance
Is an injection of funds into the business from individuals, other businesses or financial institutions
Trade credit
Is a period of time offered by suppliers of goods and services before payment is to be made
Bank Loan
Is an amount of money provided to a business for states purpose in return payment in the form of interest charges
Venture capital
Is funds that is advanced to businesses which are thought to be relatively high risk
Debt factoring
When a business sells its account receivables to a third party to immediately provide an instant source of cash flow
Micro finance
Is the provision of financial services for poor and low income clients
Crowdfunding
Is a source of finance that entails collecting relatively small amounts of money from a large number of supports ( a crowd )
Government grant
Is a sum of money given to entrepreneurs or businesses for a specific purpose
Cash
Is a businesses most liquid asset, notes and coins as well as funds held in a businesses bank accounts
Cash flow forecast
Is a document that records anticipated inflow and outflows of cash over some future period ( normally a year )
Costs
Are expenses that a business has to pay to engage in its trading activities
Revenue
Is the income a business receives from selling its good or services
Direct costs
Can be related to the production of a particular product and vary directly with the level of output
WAGES / direct labour
Indirect costs
Are overheads that cannot be allocated to the production of a particular product and relate to the business as a whole
RENT,
Full costing
Allocates all the costs of production for the whole business. Therefore these costs are absorbed into each output unit
( Absorption costing )
Contribution
Can be defined as the difference between sales revenue and variable costs of production
Break even
Is the level of production or output at which a business sales or total revenue is exactly equally to the cost of production
Profits
Are the amount by which revenue exceeds costs, money gained after sales
Contribution costing
Calculates the cost of a product solely on the basis of variable costs, thus avoiding the need to allocate fixed costs
Marginal costs
Is the extra cost resulting from producing one additional unit of output,
Cost plus pricing
Is the process of establishing the price of a product by calculating its cost of production and then adding an amount which is profit
Special order decisions
Occurs when a manager have to decide whether or not to accept unusual customer orders
Margin of safety
Measures the quantity by which a firms current level of sales exceeds the level of output necessary to break even
Incremental budgeting
Is a process where budget figures are minor changes from the preceding periods budgeted or actual data
Flexible budget
Is a budget that is designed to change along with the sales volume or production sales
Budget holders
Responsible for the use and management of a particular budget
Zero budget
Exists when a budget are automatically set at zero and budget holders have to argue their case to receive any funds
