CAPEX. OPEX, Balance Sheet & Cashflow Flashcards
- What is expenditure?
Expenditure represents a payment made in either cash or credit for purchase of goods or services.
- What is capital expenditure?
- Otherwise known as CAPEX
- This is money expended to acquire or improve an asset such as equipment or building
- What is revenue expenditure?
- Otherwise known as OPEX
- These are costs for the day to day running of the business, servicing machines, paying the heating bill etc.
- Why are CAPEX and OPEX budgets split out in financial accounts?
They have different tax obligations for example CAPEX can benefit from capital allowance
- What is a balance sheet?
- This is a snapshot of a companies financial position
- It reports on a companies assets, liabilities and ownership equity
- What is meant by assets and liabilities please give examples?
- An asset is something which is owned such as a building of piece of kit
- A liability is a debt such as a loan that still has an outstanding balance
- What is a current asset?
Cash or other assets that are expected to be converted to cash within a year
- What is a fixed asset?
Assets which are purchased for long term use and not likely to be converted quickly into cash such as land or buildings
- What is the difference between debtors and creditors?
A creditor is someone to whom you own money, a debtor is someone whom owes money to you.
- What is a cashflow forecast?
Is a plan that shows how much money you expect your business or project to receive or pay out over a set period. It can plan how much you expect how much you expend and how much you earn. It also helps indicate when you expect those transactions to take place.
- What is a cashflow forecast used for?
- Understanding the impact of future plans and possible outcomes
- Keep track of overdue payments
- Plan for upcoming cash gaps
- Manage surplus cash
- Track if spending is on target
- Why is cashflow important to a construction project?
- Allows the client to get an understanding of their financial commitments over the duration of the project and when they are likely to spend the money
- Can be used to estimate when external funding will be required
- Acts as a check against valuations
- How does cashflow forecast help a company remain solvent?
Can predict when a business has money to pay out and when money is coming in. This can highlight if a business is likely to have negative cashflow meaning they can do something about it in good time.
