business finance book definitions

Question 1

define short-term finance

Answer 1

money borrowed for one year or less

Question 2

define long-term-finance

Answer 2

money borrowed for more than one year

Question 3

define capital

Answer 3

finance provided by the owners of a business

Question 4

define internal finance

Answer 4

finance generated by the business from its own means

Question 5

define assets

Answer 5

resources used or owned by a business

Question 6

define retained profit

Answer 6

profit held by a business rather than returning it to the owners amd which may be used in the future

Question 7

define external finance

Answer 7

finance obtained from outside the business

Question 8

define bank overdarft

Answer 8

agreement with a bank where a business spends more money than it has in its accountup to an agreed limit

Question 9

define trade payables

Answer 9

buying resources from suppliers and paying for them at a later date

Question 10

define mortagage

Answer 10

long-term loan secured with property

Question 11

define repossess

Answer 11

to take back assets from people who had arranged pay for them over a long time but cannot now continue to pay for them

Question 12

define debenture

Answer 12

long-term security yeilding a fixed rate of interest, issued by a company and secured against assets

Question 13

define hire purchase

Answer 13

buying specific goods with a loan, often provided by a finance house

Question 14

define rights issue

Answer 14

sale of new shares to existing shareholders at a discount

Question 15

define venture capitalists

Answer 15

specialist investors who provide money to new businesses

Question 16

define crowd funding

Answer 16

where a lrage number of individuals invest in a business using an online platform

Question 17

define cash flow

Answer 17

flow of money into and out of a business

Question 18

define overheads

Answer 18

money spent regularly on things that are needed to keep a business operating

Question 19

define insolvent

Answer 19

inability to meet debts

Question 20

define cash flow forecast

Answer 20

prediction of all expected receipts and expenses of a business over a future time period

Question 21

define cash inflow

Answer 21

flow of money into a business

Question 22

define cash outflow

Answer 22

flow of money out of the business

Question 23

define liquid

Answer 23

asset that is easily changed into cash

Question 24

define closing cash balance

Answer 24

amount of cash that the business expects to have at the end of each month

Question 25

define total cash inflow

Answer 25

the total amount of cash a business expects to generate during a month

Question 26

define total cash outflow

Answer 26

the total amount of cash a business expects to pay during a month

Question 27

define net cash flow

Answer 27

the difference between the total cash inflow and the the total cash outflow

Question 28

define opening balance

Answer 28

the amount of cash a business expects to have at the beginning of the next month

Question 29

define drawings

Answer 29

money taken out of the business by the owner for a personal usage

Question 30

define costs

Answer 30

expenses that must be met when setting up and running a business

Question 31

define fixed costs

Answer 31

costs that do not change with the level output

Question 32

define variable costs

Answer 32

costs that change when output level changes

Question 33

define total costs

Answer 33

fixed costs and variable costs added together

Question 34

define average cost

Answer 34

cost of producing a single unit of output (total cost / quantity produced)

Question 35

define total revenue

Answer 35

money granted from the sale of output (price * quantity)

Question 36

define profit or loss

Answer 36

the difference between the total revenue and total costs

Question 37

define amortization

Answer 37

a cost associated with the falling in value of certain types of asset

Question 38

define break-even point

Answer 38

level of output where total costs and total revenue are exactly the same, neither a profit not loss is made (fixed cost / [selling price - variable cost per unit])

Question 39

define break-even chart

Answer 39

graph that shows total cost and total revenue

Question 40

define margin of safety

Answer 40

amount of output available to be sold above the break-even point where the business makes a profit

Question 41

define bulk buying

Answer 41

buying goods in large wuantities, which is usually cheaper than buying in small quantities

Question 42

define stockpile

Answer 42

large supply of goods

Question 43

define statement of comprehensive income

Answer 43

financial document showing a firm’s income and expenditure in a particular time period

Question 43

define profit

Answer 43

money left over after all costs have been subtracted from revenue

Question 44

define gross profit

Answer 44

sales revenue less cost of sales

Question 45

define operating profit

Answer 45

gross profit less expenses

Question 46

define distributed profit

Answer 46

profit that is returned to the owners of the business

Question 46

define retained profit

Answer 46

profit held inside the business rather than returning it to the owners which may be used in the future

Question 47

define finance cost

Answer 47

interest paid on loans

Question 48

define finance income

Answer 48

interest received by a business on a deposit account

Question 48

define normal profit

Answer 48

minimum profit a business needs to make to retain the interest of its owners

Question 49

define statements of financial position

Answer 49

summary at a point in time of business assets, liabilities and capital

Question 50

define assets

Answer 50

resources used or owned by a business (liabilities + capital)

Question 51

define non-current assets

Answer 51

assets that last for more than a year

Question 52

define current assets

Answer 52

assets that are likely to be sold in less than a year

Question 53

define liquidity

Answer 53

ease of speed with which assets can be sold for cash

Question 54

define trade receivables

Answer 54

amounts of money that are owed to a company by its customers

Question 55

define current liabilities

Answer 55

debts that have to be repaid within a year

Question 55

define net current assets

Answer 55

the difference between current assets and current liabilities

Question 56

define non-current liabilities

Answer 56

debts that can be paid after a year

Question 57

define net assets

Answer 57

the difference between all assets and all liabilities

Question 58

define gross profit margin

Answer 58

gross profit expressed as a percentage of revenue

Question 59

define operating profit margin

Answer 59

operating profit expressed as a percentage of revenue

Question 60

define mark up

Answer 60

profit made per item sold (profit per item / cost per item * 100)

Question 61

define current ratio

Answer 61

assesses the firm’s liquidity by dividing current liabilities into current assets

Question 62

define price

Answer 62

the monetary value of a product (cost + [cost * mark-up])

Question 63

define acid test ratio

Answer 63

similar to the current ratio excludes inventory

Question 64

define return of capital employed

Answer 64

operating profit as a percentage of capital employed