Business term 2.1 & 2.2 Flashcards
Sales of assets
The sale of a long term or fixed assets in return for cash in order to give a cash injection to the company
Owners capital
When an entrepreneur invests their own money in a business e.g. from personal savings
Retained profit
Profit kept within a business from profit for the year to help finance future activities. This is the profit after tax to help finance future activity.
Internal finance
The funds used within a business to fund expansion or growth. The key element is that it is finance that comes from within the business rather than from outside the business
External finance
Capital raised from outside of the business
Method of finance
How the finance is provided I.e. loan
Source of finance
Where the finance is coming from I.e. loan
Other businesses
Businesses with healthy cash balances may look to invest in other businesses. This may be with a view to higher potential returns than the business is receiving with cash sat in the bank.
Business angels
Wealthy individuals make personal investments into start-up businesses in return for a share of the business I.e. percentage equity.
Crowd funding
When a business venture is funded by raising small amounts of money from lots of people. This is usually done through the internet.
Family and friends
A potential source of finance for entrepreneurs when people knows to them are willing to invest
Peer-to-peer
The practise of an individual lending to other individuals (peers) with whom there is no relationship or contact.
Bank
Financial institutions that are licensed to take deposits, pay interest, make loans and act as an intermediary in financial transactions, as well as provide other financial services to customers.
Grant
Fixed amount of capital provided to business by the government or other organisations to fund specific projects
Trade credit
An arrangement by a business to provide goods and services on account. The buyer does not have to make immediate cash payments.
Leasing
A contract that allows the renting of asses from another party. In the short run the business does not have to pay the high cost of the asset.
Loan
When a lender provides capital (money) to a borrower and the borrower agrees to repay the borrower money, with interest, over a period of time.
Venture capital
Investments from an established business person or business into a new business in return for a percentage equity in the new business. Often considered as a high risk investment but potentially rewarding investments
Overdraft
The facility to overspend on a current account up to an agreed sum. The business in effect can withdraw money from the account that is not there meaning they go overdrawn or in the red.
Share capital
Money raised from the sale of shares which is used to fund the future activities of a business.
Opening balance
How much the business has at the start of each month. The previous months closing balance.
Net cash flow
The difference of cash inflows and cash outflows each month. The previous months closing balance.
Outflows
Cash going out of a business on purchases and payments e.g. vehicles, stock etc.
Inflow
Cash coming into a business from sales, loans and other sources of finance
Cash flow forecast
A forward looking statement that tries to predict cash inflows and outflows in the future
Closing balance
How much the business has at the end of each month. Opening balance + net cash flow
Business plan
A document that describes how an entrepreneur proposes to set up a new business. This includes the nature of the product or service, objectives, functional activities and financial forecasts
Cash statement
A backward looking statement that shows what happened to cash inflows and outflows
