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IB Business > Finance > Flashcards

Finance Flashcards

1
Q

Capital expenditure

A

Finances spent on fixed assets

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2
Q

Revenue expenditure

A

Finances spent on daily operations

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3
Q

Examples of capital expenditure

A
  • capital
  • Land
  • vehicles
    -furniture
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4
Q

Examples of revenue expenditures

A
  • electrical bills
  • insurance
    -wages and salaries
  • supplies and raw materials
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5
Q

Collateral

A

Assets which look good to investors and and the bank

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6
Q

Internal sources of finance

A

Money or funds that come from within the business

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7
Q

Business angels

A

Extremely wealthy individuals who invest their own money into small/ medium sized businesses which have growth potential

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8
Q

Crowd funding

A

The practice of easing finance for a business venture or project by getting small amounts of money from large numbers of people , usually though online platforms

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9
Q

External sources of finance

A

When the funds are sourced form outside the business

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10
Q

Internal public offering ( IPO)

A

When a business converting its legal status to a publicly traded company by selling shares on the stock market for the first time

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11
Q

Internal sources of finance

A

Funds generated from within the business

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12
Q

Leasing

A

Form of hiring whereby a lessee pays rental income to hire assets from the lessor , the legal owner of the asset .

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13
Q

Loan capital ( debt capital )

A

Medium to long term sources of interest baring finance , obtained from commercial lenders , like banks

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14
Q

Long term sources of finance

A

Finance available for over 12 months

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15
Q

Micro finance

A

A financial service aimed at entrepreneurs of small businesses

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16
Q

Overdrafts

A

Allows a business to spend in excess of the amount in their bank account , up to a pre-arranged limit .

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17
Q

Personal funds

A

Source of initial finance ; referring to the use of an entrepreneur’s own savings

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18
Q

Retained profit

A

The value of the surplus That a business keeps to use after paying all its required costs

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19
Q

Sale of assets

A

Selling existing items of value that a business owns , such as dormat assets and absolute assets ( outdated )

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20
Q

Share capital

A

The money raised from selling shares in a limited liability company

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21
Q

Share issue

A

An already existing publicly held company raises further finance by selling more of its shares

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22
Q

Short term sources of finance

A

Finances available for less than 1 year

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23
Q

Stock exchange

A

A highly regulated market place where individuals and businesses can buy or sell shares in publicly traded companies

24
Q

Trade credit

A

Allows a business to postpone payments, but now pay later

25
Q

Average costs

A

Average cost per unit of output

26
Q

Average revenue

A

Refers to the value of sales received from customers per unit of good

27
Q

Cost

A

The sum of money a business pays during the production process

28
Q

Direct costs

A

Costa specifically attributed to the production of a specific project or service

29
Q

Fixed costs

A

Costa which do not change depending on output

30
Q

Indirect costs / overheads

A

Costs which do not directly relate to the production or sale of a specific product

31
Q

Price

A

Refers to the amount of money a product is sold for

32
Q

Profit

A

Positive difference between a businesses revenue and total costs

33
Q

Revenue

A

The amount of money a business earns from the sale of goods and services

34
Q

Revenue stream

A

Refers to the money coming into a business from various business activities

35
Q

Running costs

A

Ongoing costs of operating a business

36
Q

Set up costs

A

The items of expenditure needed to start a business

37
Q

Total costs

A

The sum of all variable costs and all fixed costs of production

38
Q

Total revenue

A

All the money coming into a business usually from sales of good

39
Q

Variable costs

A

Costs that change with output

40
Q

Total costs Formula

A

Total fixed costs + total variable costs

41
Q

Total variable costs Formula

A

Average variable costs x quantity

42
Q

Total fixed costs Formula

A

Average fixed costs x quantity

43
Q

Average variable costs Formula

A

Total costs \ quantity

44
Q

Sales revenue Formula

A

Price x quantity sold

45
Q

Gross profit margin formula

A

(Gross profit / sales revenue ) x 100

46
Q

Profit Margin

A

( profit before Interest and tax / sales revenue ) x 100

47
Q

Return on capital employed ratio

A

( profit before interest and tax / capital employed ) x100

48
Q

Capital employed ratio

A

No current liabilities + equity

49
Q

Current ratio

A

Current assets / current liabilities

50
Q

Acid test ratio

A

(Current assets -stock ) / current liabilities

51
Q

Profit ratio

A

Total revenue -total costs

52
Q

Gross profit formula

A

Sales revenue -cost of goods

53
Q

Cost of goods sold formula

A

(Opening stalk + purchases) - closing stalk

54
Q

Net profit formula

A

Gross profit -expenses

55
Q

Net assets formula

A

Total assets -total liabilities

56
Q

Total equity

A

Total assets -total liabilities = net assets = total equity

IB Business (1 decks)

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