Finance Flashcards

1
Q

An asset is…

A

Something a business owns

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2
Q

A liability is…

A

Something a business owes

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3
Q

Current liabilities are…

A

Something that must be paid back within a year

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4
Q

Long-term liabilities are…

A

Something that can be repaid over a long period of time

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5
Q

Current assets are…

A

Something that will be used up in a short period of time

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6
Q

Fixed assets are…

A

Something that will last for a longer period of time

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7
Q

A statement of comprehensive income shows…

A

How much revenue was received and how it was spent

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8
Q

A debtor is…

A

Someone who owes a company money

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9
Q

Turnover is…

A

The total revenue received in a given period of time

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10
Q

Cost of sales is…

A

Costs involved in directly making a product

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11
Q

Gross profit is…

A

Profit made before taking expenses into account

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12
Q

Expenses are…

A

Other costs such as bills, machinery and advertising

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13
Q

Net profit is…

A

Profit made after all expenses have been deducted

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14
Q

A cash flow forecast is…

A

A prediction of how money will flow in and out of a business in a given time period

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15
Q

How is net cash flow calculated?

A

Total inflows - total outflows

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16
Q

How is closing balance calculated?

A

Net cash flow + opening balance

17
Q

The order of financial records is…

A
Purchase order
Delivery note
Goods received note
Invoice
Receipt 
Credit note
Statement of account
18
Q

How is revenue calculated?

A

Price per unit x units sold

19
Q

How is total variable cost calculated?

A

Cost per unit x units made

20
Q

The break even point shows…

A

How many units must be sold in order to make a profit

21
Q

How is the break even point calculated?

A

Fixed costs / (selling price per unit - variable cost per unit)

22
Q

An income statement…

A

Lists the business’ actual income and expenditure

23
Q

A statement of financial position…

A

Shows how much money invested in the business (capital) has been spent

24
Q

Short term finance is…

A

Sources of money which must be repaid within a year

25
Long term finance is…
Sources of money which are borrowed or invested, typically for over a year
26
External sources of finance include…
Bank loans, overdrafts, trade credit
27
Internal sources of finance include…
Retained profit, owner funds
28
Retained profit is…
Profit which is not shared. It is retained within the business
29
A bank overdraft is where…
A bank lets a business ow it money when its balance goes below zero
30
How is gross/net profit margin calculated?
(Sales revenue / gross/net profit) x 100
31
How is current ratio calculated?
Current assets / current liabilities
32
How is liquid capital ratio calculated?
(Current assets - inventory) / current liabilities ALWAYS GIVE ANSWER TO 2 D.P.