Finance Flashcards
An asset is…
Something a business owns
A liability is…
Something a business owes
Current liabilities are…
Something that must be paid back within a year
Long-term liabilities are…
Something that can be repaid over a long period of time
Current assets are…
Something that will be used up in a short period of time
Fixed assets are…
Something that will last for a longer period of time
A statement of comprehensive income shows…
How much revenue was received and how it was spent
A debtor is…
Someone who owes a company money
Turnover is…
The total revenue received in a given period of time
Cost of sales is…
Costs involved in directly making a product
Gross profit is…
Profit made before taking expenses into account
Expenses are…
Other costs such as bills, machinery and advertising
Net profit is…
Profit made after all expenses have been deducted
A cash flow forecast is…
A prediction of how money will flow in and out of a business in a given time period
How is net cash flow calculated?
Total inflows - total outflows
How is closing balance calculated?
Net cash flow + opening balance
The order of financial records is…
Purchase order Delivery note Goods received note Invoice Receipt Credit note Statement of account
How is revenue calculated?
Price per unit x units sold
How is total variable cost calculated?
Cost per unit x units made
The break even point shows…
How many units must be sold in order to make a profit
How is the break even point calculated?
Fixed costs / (selling price per unit - variable cost per unit)
An income statement…
Lists the business’ actual income and expenditure
A statement of financial position…
Shows how much money invested in the business (capital) has been spent
Short term finance is…
Sources of money which must be repaid within a year
Long term finance is…
Sources of money which are borrowed or invested, typically for over a year
External sources of finance include…
Bank loans, overdrafts, trade credit
Internal sources of finance include…
Retained profit, owner funds
Retained profit is…
Profit which is not shared. It is retained within the business
A bank overdraft is where…
A bank lets a business ow it money when its balance goes below zero
How is gross/net profit margin calculated?
(Sales revenue / gross/net profit) x 100
How is current ratio calculated?
Current assets / current liabilities
How is liquid capital ratio calculated?
(Current assets - inventory) / current liabilities
ALWAYS GIVE ANSWER TO 2 D.P.
