Comp 3 LA C Flashcards
Cash inflows
Receipts entering an enterprises bank account.
Cash outflows
Payments leaving an enterprises bank account.
Cash flow statement
Statement of actual cash inflows and outflows over a period of time.
Cash flow forecast
Forecast of cash inflows and outflows over a period of time.
Break-even
Point where income and expenditure are equal.
Margin of safety
Difference between actual and break-even output.
Contribution
Amount each sale contributes to paying fixed costs.
Capital expenditure
Purchase of fixed assets.
Revenue expenditure
Purchase of goods needed for day to day operations.
Monthly net cash flow
total cash inflows (receipts) – total cash outflows (payments)
Opening balance
closing balance of the previous month
Closing balance
opening balance + monthly net cash flow
Contribution per unit
selling price per unit – variable cost per unit
Break-even point
fixed costs / contribution per unit
Margin of safety
actual output – break-even output
Retained profit
Long term source of finance – seen in statement of financial position. No interest charged.
Owner funds
Low risk as it does not affect working capital.
Banks more likely to loan if the owner has used some of their own capital.
Sale of asset
Items owned by the enterprise are sold.
Enterprise using funds of its own so no interest to pay.
Bank loan
Agreed amount, paid over a set period with interest charged.
Leasing equipment
Borrow equipment for set period paying a fee.
Hire purchase
Purchase equipment and pay back over a period of time.
Government grants
Financial incentives to aid economic growth.
Venture capital
Individual offers investment for agreed % return.
Peer to peer lending
Opportunity for individuals to invest via an online portal.
