Chapter 3: Business Finance Flashcards
instalment
a series of regular payments made until all the money owed has been repayed
short term finance
money borrowed for one year or less
long term finance
money borrowed for more than a year
capital
finance provided by the owners of a business
internal finance
finance generated by the business from its own means
retained profit
profit held by a business rather than returning it ti the owners and which may be used in the future
assets
resources used or owned by a business
such as: cash.stock,machinery,tools and equipment
external finance
finance obtained from outside the business
bank overdraft
agreement with a bank where a business spends more money than it has in its account
trade payable
buying resources from suppliers, such as raw materials and components and paying for them at a later date
repossess
to take back
debenture
long term security yielding a fixed rate of interest, issued by a company and secured against assets
hire purchase
buying specific goods with a loan, often provided by a finance house
rights issue
sale of new shares to existing shareholders
venture capitalists
specialist investors who provide money for business purposes (often to new businesses)
crowd funding
where a large number of individuals (a crowd) invest in a business venture using an online platform
(avoids using a bank)
cashflow
flow of money into and out of a business
liquid asset
asset that can easily be changed into cash
overheads
money spent regularly
example; on rent,insurance,electricity
insolvent
inability to meet debts
cash flow forecast
prediction of all expected receipts and expenses of a business over a future time period (shows the expected cash balance at the end of each month )
cash inflow
flow of money into a business
cash outflow
flow of money out of a business
drawings
money taken out of the business by the owner for personal use
closing cash balance
amount of cash that the business expects to have at the end of each month
costs
expenses that must be met when setting up and running a business
fixed costs
costs that do nit vary with the level of output
variable costs
costs that change when output levels change
total costs
fixed costs and variable costs added together
total revenue
money generated from the sale of output
price times quantity
Amortization
is a cost associated with the falling in value of certain types of assets
break - even point
level of output where total costs and total revenue are the exactly the same (neither a profit or a loss)
break - even chart
graph that shows total cost and revenue; the break even point is where the business makes profit
bulk buying
buying goods in large quantities (which is usually cheaper)
stockpile
large supply of goods that are being kept for possible use in the future
statement of comprehensive income
financial document showing a firms income and expenditure in a particular time period
profit
money left after all costs have been subtracted from the revenue
distributed profit
profit that is returned ti the owners of a business
retained profit
profit held by a business rather than returning it to the owners (may be used in the future)
dividend
share of the profit paid to shareholders in a company
finance cost
interest paid on loans
finance income
interest received by the business on deposit accounts
normal profit
minimum profit a business needs to make to retain the interest of the owners
adjustments
profits made outside of the businesses main source of income
statement of financial position
summary at a point of time of business assess, liabilities and capital
assets
resources used or owned by a business (such as cash stock,machinery,tools and equipment )
liabilities
debts of the business which provide a source of funds
capital
finance provided by the owners of the business
non current asset
assets that lasts for more then a year
current assets
assets that are likely to be changed into cash within a year
liquidity
ease in which assets can be sold for cash
trade receivables
amounts of money that are owed to a company by its customers
current liabilities
debts that have to be repaid within a year
net current assests
current assets minus current liabilities (also known as working capital)
non current liabilities
debts that are payable after 12 months
net assests
value of all assets without the value of all liabilities
the total of the bottom part of the balance sheet
goodwill
value that a company has because it has a good relationship with its customers and suppliers
external finance
finance obtained from outside the business
bank overdraft
agreement with a bank
profitability ratios
measure the performance of the business and focus on profit, revenue and the amount of money invested
liquidity ratios
measure how easily a business can pay its short term debts (such as wages or suppliers)
quantitative information
information expressed in numbers
excise duties
taxes on selected goods (such as petrol and tobacco)
auditing
accounting procedure that checks thoroughly the accuracy of a company’s accounts
