business unit 5 vocabulary

Question 1

start up capital

Answer 1

the finance needed by a new business to pay for essential fixed and current assets before it can begin trading

Question 2

working capital

Answer 2

the finance needed by a business to pay its day to day costs

Question 3

capital expenditure

Answer 3

money spent on fixed assets which will last for more than one year

Question 4

revenue expenditure

Answer 4

money spent day today expenses which do not involve the purchase of a long term asset, for example wages or rent

Question 5

internal finance

Answer 5

obtained from within the business itself

Question 6

external finance

Answer 6

obtained finance sources outside of and separate from the business

Question 7

micro finance

Answer 7

providing financial services - including small loans - to for people not served by traditional banks

Question 8

cash flow

Answer 8

the cash inflows and outflows over a period of time

Question 9

cash inflow

Answer 9

the sums of the money received by a business during a period of time

Question 10

cash outflows

Answer 10

the sum of money paid out by a business during a period of time

Question 11

cash flow cycle

Answer 11

shows the stages between paying out cash for labour, materials etc. and receiving cash from the sale of goods

Question 12

profit

Answer 12

the surplus after total costs have been subtracted from sales revenue

Question 13

cash flow forecast

Answer 13

an estimate of future cash inflows and outflows of a business, usually on a month by month basis. this then shows the expected cash balance at the end of each month

Question 14

opening cash / bank balance

Answer 14

the amount of cash held by the business at the end of month. this becomes next month’s opening balance

Question 15

accounts

Answer 15

the financial records of a firm’s transactions

Question 16

accountants

Answer 16

the professional qualified people who have responsibility for keeping accurate accounts and for producing the final accounts

Question 17

final accounts

Answer 17

they are produced at the end of each year and give details of the profit or loss and over the year and the worth of the business

Question 18

income statement

Answer 18

a document that records the income of a business and all costs incurred to earn that income over a period of time (one year for example). its also known as profit and loss account

Question 19

gross profit

Answer 19

its made when sales revenue if greater than the cost of goods sold

Question 20

sales revenue

Answer 20

the income to a business during a period of time from the sale or goods or services

Question 21

cost of goods sold

Answer 21

the cost o producing or buying in the goods actually sold by the business during a time period

Question 22

trading account

Answer 22

it shows how the gross profit of a business is calculated

Question 23

net profit

Answer 23

the profit made by a business after all costs have been deducted from the sales revenue. its calculated by subtracting overhead costs from gross profits

Question 24

depreciation

Answer 24

the fall in the value of a fixed asset over time

Question 25

retained profit

Answer 25

the net profit reinvested back into a company, after deducted tax and payments to owners, such as dividends

Question 26

balance sheet

Answer 26

shows the value of a business’s assets and liabilities at a particular time. sometimes referred to as ‘statement of financial position’

Question 27

assets

Answer 27

items of value which are owned by the business. they may be fixed( non current) or short term current assets

Question 28

liabilities

Answer 28

the debts owned by the business

Question 29

non current assets

Answer 29

item owned by the business for more than one year

Question 30

current assets

Answer 30

owned by a business and used within one year

Question 31

non current liabilities

Answer 31

long term debts owned by the business

Question 32

liquidity

Answer 32

the ability of a business to pay back its short term debts

Question 33

capital employed

Answer 33

it shareholder’s equity plus non current liabilities and is the total long term and permanent capital invested in a business

Question 34

illiquid

Answer 34

means that assets are not easily convertible into cash