Definition

Question 1

budget

Answer 1

financial plan for expected revenue and expenditure for a particular department of an organisation

Question 2

variance

Answer 2

difference between the budgeted figure and the actual outcome

Question 3

favourable variance

Answer 3

when differences are financially beneficial to the organisation

Question 4

adverse variance

Answer 4

when differences are financially detrimental to the organisation

Question 5

cash inflow

Answer 5

cash coming into a business, usually from sales revenue

Question 6

cash outflow

Answer 6

cash leaving a business, usually due to a firm’s liabilities

Question 7

net cash flow

Answer 7

difference between cash inflow or outflow

Question 8

opening balance

Answer 8

amount of cash at the beginning of a trading period

Question 9

closing balance

Answer 9

amount of cash at the end of a trading period

Question 10

investment

Answer 10

spending on capital or productive assets (e.g. production facilities, business premises or machinery)

Question 11

overtrading

Answer 11

when a business attempts to expand too quickly without the sufficient resources to do so

Question 12

overborrowing

Answer 12

the proportion of capital raised through external sources of finance

Question 13

credit control

Answer 13

process of monitoring and managing debtors such as ensuring that only suitable customers are given trade credit and that customers do not exceed the agreed credit period

Question 14

overdraft

Answer 14

when a firm takes out more money than there actually is in their bank account

Question 15

cash flow

Answer 15

the transfer or movement of money into and out of an organisation

Question 16

cash flow forecast

Answer 16

financial tool used to show expected/predicted movement of cash coming in and going out of a business for a given period of time

Question 17

working capital style

Answer 17

refers to the time between cash outflows for production costs and cash inflows from customers who pay upon receipt of their finished goods and services

Question 18

fixed costs

Answer 18

costs of production that a business has to pay regardless of how much it produces or sells (e.g. rent, bank loans, advertising expenditure, salaries)

Question 19

variable costs

Answer 19

costs of production that change in proportion with the level of output or sales

Question 20

direct cost

Answer 20

related to an individual project or the output of a particular product

Question 21

indirect cost (overheads)

Answer 21

those that cannot be clearly traced to the production or sale of any single product

Question 22

equity

Answer 22

value of the business that belongs to the owners

Question 23

intangible assets

Answer 23

non-physical fixed assets that have the ability to earn revenue for a business (e.g. branding, copyright, patents, goodwill & registered trademarks)

Question 24

depreciation

Answer 24

the fall in the value of noncurrent (fixed) assets over time

Question 25

mortgage

Answer 25

secured loans for purchase of property such as land or buildings

Question 26

business development loans

Answer 26

highly flexible loans that had to meet specific needs of the borrower in order to develop particular business aspects

Question 27

debentures

Answer 27

long-term loans issued by a business to raise capital to meet expenses of an upcoming project or pay for a planned expansion

Question 28

residual value (scrap value)

Answer 28

estimate of the value of a noncurrent asset at the end of its useful life