business finance book definitions Flashcards
define short-term finance
money borrowed for one year or less
define long-term-finance
money borrowed for more than one year
define capital
finance provided by the owners of a business
define internal finance
finance generated by the business from its own means
define assets
resources used or owned by a business
define retained profit
profit held by a business rather than returning it to the owners amd which may be used in the future
define external finance
finance obtained from outside the business
define bank overdarft
agreement with a bank where a business spends more money than it has in its accountup to an agreed limit
define trade payables
buying resources from suppliers and paying for them at a later date
define mortagage
long-term loan secured with property
define repossess
to take back assets from people who had arranged pay for them over a long time but cannot now continue to pay for them
define debenture
long-term security yeilding a fixed rate of interest, issued by a company and secured against assets
define hire purchase
buying specific goods with a loan, often provided by a finance house
define rights issue
sale of new shares to existing shareholders at a discount
define venture capitalists
specialist investors who provide money to new businesses
define crowd funding
where a lrage number of individuals invest in a business using an online platform
define cash flow
flow of money into and out of a business
define overheads
money spent regularly on things that are needed to keep a business operating
define insolvent
inability to meet debts
define cash flow forecast
prediction of all expected receipts and expenses of a business over a future time period
define cash inflow
flow of money into a business
define cash outflow
flow of money out of the business
define liquid
asset that is easily changed into cash
define closing cash balance
amount of cash that the business expects to have at the end of each month
define total cash inflow
the total amount of cash a business expects to generate during a month
define total cash outflow
the total amount of cash a business expects to pay during a month
define net cash flow
the difference between the total cash inflow and the the total cash outflow
define opening balance
the amount of cash a business expects to have at the beginning of the next month
define drawings
money taken out of the business by the owner for a personal usage
define costs
expenses that must be met when setting up and running a business
define fixed costs
costs that do not change with the level output
define variable costs
costs that change when output level changes
define total costs
fixed costs and variable costs added together
define average cost
cost of producing a single unit of output (total cost / quantity produced)
define total revenue
money granted from the sale of output (price * quantity)
define profit or loss
the difference between the total revenue and total costs
define amortization
a cost associated with the falling in value of certain types of asset
define break-even point
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])
define break-even chart
graph that shows total cost and total revenue
define margin of safety
amount of output available to be sold above the break-even point where the business makes a profit
define bulk buying
buying goods in large wuantities, which is usually cheaper than buying in small quantities
define stockpile
large supply of goods
define statement of comprehensive income
financial document showing a firm’s income and expenditure in a particular time period
define profit
money left over after all costs have been subtracted from revenue
define gross profit
sales revenue less cost of sales
define operating profit
gross profit less expenses
define distributed profit
profit that is returned to the owners of the business
define retained profit
profit held inside the business rather than returning it to the owners which may be used in the future
define finance cost
interest paid on loans
define finance income
interest received by a business on a deposit account
define normal profit
minimum profit a business needs to make to retain the interest of its owners
define statements of financial position
summary at a point in time of business assets, liabilities and capital
define assets
resources used or owned by a business (liabilities + capital)
define non-current assets
assets that last for more than a year
define current assets
assets that are likely to be sold in less than a year
define liquidity
ease of speed with which assets can be sold for cash
define trade receivables
amounts of money that are owed to a company by its customers
define current liabilities
debts that have to be repaid within a year
define net current assets
the difference between current assets and current liabilities
define non-current liabilities
debts that can be paid after a year
define net assets
the difference between all assets and all liabilities
define gross profit margin
gross profit expressed as a percentage of revenue
define operating profit margin
operating profit expressed as a percentage of revenue
define mark up
profit made per item sold (profit per item / cost per item * 100)
define current ratio
assesses the firm’s liquidity by dividing current liabilities into current assets
define price
the monetary value of a product (cost + [cost * mark-up])
define acid test ratio
similar to the current ratio excludes inventory
define return of capital employed
operating profit as a percentage of capital employed
