Finance

Question 1

Sources of finance for businesses

Answer 1

Own equity 
Bank loans 
Mortgage 
Bank overdraft 
Government grants
Taking on additional partners 
Selling shares
Venture capitalists and business Ángels
Retained profit

Question 2

Own equity

Answer 2

Where a business gets its owners/shareholders to invest more money into a business.

Question 3

Mortgage

Answer 3

Where a bank will give you a sum of money to pay off a property which you will pay back in monthly installations for 25 years

Question 4

Bank loans

Answer 4

Where a bank gives you a sum of money that you have to pay off in monthly installations with interest (long term)

Question 5

Bank overdraft

Answer 5

A short term source of finance where you are allowed to use slightly more money than you have (with a limit).

Question 6

Government grants

Answer 6

Where the government gives a business and useful sum of money on the basis that they complete some criteria.

Question 7

Taking on an additional partner

Answer 7

Where a business (usually a sole trader or partnership) allows another person to join the firm and invest money in the business so that you get extra funding and their specialist help.

Question 8

Venture capital and angel investors

Answer 8

People or other businesses which buy shares in your business because they think it will be successful, also gain expertise because the investors tend to know what they are doing.

Question 9

Retained profits

Answer 9

Re investing and spending money that the business has already made rather than rewarding owners to grow the business

Question 10

Cash budget

Answer 10

A document created on a spreadsheet to ensure that the business won’t come into any cash flow issues in the future.

Question 11

Methods of fixing problems with cash flow.

Answer 11

Leasing and hire purchase expensive assets
Use sources of finance to keep business stable
Raising additional funding through own equity and venture capital
Selling unnecessary assets
Reduce expenditures through decreasing electricity and wages.
Decreasing raw materials because sales are decreasing and you don’t need that amount of stock any more.

Question 12

Technology in finance

Answer 12

Spreadsheets 
Online banking 
EPOS
Pay Pal 
Email

Question 13

Spreadsheets

Answer 13

Can be used to calculate totals quickly and store informations safely
Use what if statements to instantly carry out difficult and complicated financial operations
Can transfer info easily into graphs and charts to make info easier to read.
Faster than using paper.

Question 14

Online banking

Answer 14

Is used to quickly make transactions between your bank and the business and automatically pay suppliers when they need the money
Also helps with the monitor of cash flow.

Question 15

Pay pal

Answer 15

Can be used to quickly collect customer payments and increases the speed of cash flow.

Question 16

EPOS

Answer 16

Allows the business to quickly and automatically register the income from sales.

Question 17

Parts of a cash budget

Answer 17

Opening balance 
Total receipts 
Total cash available
Total payments 
Closing Balance

Question 18

Opening balance

Answer 18

The total amount of cash the business is predicted to have at the start of a month

Question 19

Total receipts

Answer 19

All the revenue expected to be generated from selling products. And other sources of finance.

Question 20

Total cash available

Answer 20

The opening balance plus the total receipts expected, this is all the income expected for that month.

Question 21

Total cash available

Answer 21

The opening balance plus the total receipts expected, this is all the income expected for that month.

Question 22

Total payments

Answer 22

This is the total expenditure of money expected for that month

Question 23

Closing balance

Answer 23

The total cash available minus the total payments, the cash total expected to be left at the end of the month.

Question 24

Reasons for using a cash budget

Answer 24

To predict how much cash the business will have to spend
To predict if the business will have a surplus and be able to grow
To be able to predict if the business will have a deficit and will need a source of finance in place.

Question 25

Deficit definition

Answer 25

A deficit is a negative amount of money in a business

Question 26

Surplus definition

Answer 26

Where there is an excess of money in the business meaning that the business can make a profit or reinvest in the business

Question 27

Income statement definition

Answer 27

A document created to show whether a business is making a profit or a loss.

Question 28

Reasons to make an income statement

Answer 28

Legal reasons
To find out how much revenue they are getting from sales
To calculate expenses
To find out how much profit is being made by the business
To calculate the cost of sales
To compare with other years

Question 29

Parts of an income statement

Answer 29

Sales 
Less: cost of sales 
Gross profit 
Total expenses 
Profit for the year

Question 30

Total sales income statement definition

Answer 30

The total revenue generated by the selling of products to customers

Question 31

Less cost of sales: income statements

Answer 31

The total cost of purchasing materials for the product.

Question 32

Gross profit income statements

Answer 32

The total sales revenue minus the less cost of sales

Question 33

Total expenses income statements

Answer 33

The costs of overheads in the business

Question 34

Profits for the year income statements

Answer 34

The gross profit minus the expenses. Any money or capital left at the end of the year which is split between the owners depending on how much of the business they own.

Question 35

Acronym for income statements

Answer 35

S L O C G E T P

Question 36

Cash budget acronym

Answer 36

O R T P T C