Business Finance (AS LEVEL) Flashcards
Whats start-up capital?
capital needed by any entrepreneur to start a business
Whats working capital?
the capital needed to pay for raw materials and day-to-day running cost .
What is short term capital?
This is finance required for short periods of time of up to a year
What is long term capital?
money required for more than a year
Whats profit
value of goods sold less costs
liquidity
the ability of a business to pay its short term debts
administration
when administrators manage a business that is unable to pay its debts with the intention of selling it as a going concern
Bankruptcy
legal procedure for liquidating a business which cannot fully pay its debts out of its current asset
liquation
when a business ceases trading and its assets are sold for cash to pay suppliers and other creditors
current assets
assets that can easily be turned into cash within a year.
ex: cash, trade receivables , inventory
current liability
debts have to be paid within a year
capital expenditure
the purchase of non current assets that are expected to last for more than a year
revenue expenditure
spending on all costs and assets other than non-current assets.
ex; wages
internal sources
raising finance from a business’s own asset or from profits left in the business(retained earning)
external sources
raising finance from sources outside the business
ex: bank
retained earnings
profit after tax has been deducted that are kept in the business rather than paid to shareholders
non current assets
assets that are kept and used by the business for more than a year
overdraft
a credit that a bank agrees can be borrowed by a business up to an agreed limit as when required
factoring
selling of claims over trade receivables to a specialist organization in exchange of immediate liquidity
