Definitions

Question 1

Define working capital

Answer 1

money needed by the business to pay for day-to-day expenses such as raw materials, wages and electricity

Question 2

Define capital expenditure

Answer 2

this is money spent on non-current assets that’ll last for more than a year e.g. buildings;
These assets are needed at the start of the business and as it expands

Question 3

Define revenue expenditure

Answer 3

this is money spent on daily expenses and do not involve the purchase of long term assets e.g. rent, wages and electricity

Question 4

Define start-up capital

Answer 4

money needed by a new business to pay for non current and current assets before it can begin trading

Question 5

Define cash flow

Answer 5

the cash inflow and outflow of a business over a period of time

Question 6

Define cash inflow

Answer 6

this is the amount of cash received by a business over a period of time e.g. sales revenue

Question 7

Define cash outflow

Answer 7

this is the amount of cash paid out by a business over a period of time e.g. payment to suppliers

Question 8

Define liquidation

Answer 8

this when the business is forced to sell all of its assets or everything it owns in order to pay off debts

Question 9

Define opening cash balance

Answer 9

it the amount of cash held by the business at the beginning of the month

Question 10

Define closing cash balance

Answer 10

it is the amount of cash held by the business at the end of the month

Question 11

Define Profit

Answer 11

it is the surplus amount after total cost have been deduced from sales

Question 12

Define assets

Answer 12

these are items of value owned by the business

Question 13

Define current assets

Answer 13

these are assets that are owned for only a short period of time e.g. inventory, trade receivables and debts from customers

Question 14

Define fixed/ non-current assets

Answer 14

these are assets owned by the business that’ll last for more than a year e.g. company vehicles, buildings, equipment

Question 15

Define liabilities

Answer 15

theses are debts owed by the business to its creditors

Question 16

Define current liabilities

Answer 16

these are liabilities that are repaid within a year e.g.

overdraft and trade payables to suppliers

Question 17

Define non-current liabilities

Answer 17

these are liabilities that do not have to be repaid within the year e.g. loans, debentures

Question 18

Define shareholder’s equity

Answer 18

shareholders equity is the total amount of money invested into the business by shareholders