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Business gcse > Finance > Flashcards

Finance Flashcards

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1
Q

whats start up capital?

A

capital needed by an entrepreneur when starting a business

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2
Q

working capital

A

capital needed to finance day to dy expenses and pay short term debt

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3
Q

Non current/ fixed assets

A

resources owned by a business which will be used for a period longer than a year, like building and machinery

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4
Q

capital expenditure

A

spending by a business on non current assets

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5
Q

long term finance

A

debt used to finance the purchase of non current assets or expansion, borrowing not expected to be returned less than 5 years

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6
Q

short term finance

A

loands or debt business expects to pay back within a year

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7
Q

retained profit

A

profit remaining after all expenses have been paid, and is reinvested back into business

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8
Q

overdraft

A

agreement with bank which allows a business to spend more money than it has in account, loan has to be repaid within a year

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9
Q

trade receivables

A

amount owed to a business by customers who bought goods on credit

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10
Q

debt factoring

A

selling trade receivables to improve business liquidity

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11
Q

bank loan

A

provision if finance by a bank which business. will repay with interest over a period of time

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12
Q

leasing

A

obtaining the use of non current asset by paying a fixed amount for a period pf time

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13
Q

mortgage

A

long term loan used to purchase land or buildings

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14
Q

debenture

A

a bond issued by a company to raise long term finance usually at a fixed rate pf interest

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15
Q

equity finance

A

permanent finance provided by owners in a limited company

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16
Q

micro finance

A

small amounts of capital loaned to entrepreneur in countries where business finance is difficult to obtain

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17
Q

crowd funding

A

financing a business idea by obtaining small amounts of capital from a large amount of people

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18
Q

why business needs finance

A
  1. start up capital
    2/ invest in latest technology and machinery
  2. finance espansion
  3. pay day to day expenses
  4. Markey research
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19
Q

what are the internal sources of finance

A
  1. retained profit
  2. sales of non current assets
    3 reduce inventory
  3. cash balance
  4. reduce trade recievables
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20
Q

what are other sources of finance

A
  1. micro finance
  2. crowd funding
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21
Q

why’s cash important to business

A

without cash, business will not be able to pay day to day expenses and business will be forced into liquidation

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22
Q

whats cash flow forecast

A

estimate of future cash inflows and outflows in business, if inflows more than outflow=positive chasflow, otherwise negative cashflow

23
Q

sources of inflow

A
  1. sales. of products
  2. payment by debtors
  3. borrowing money
  4. sales of assets
  5. investors like shareholders putting in money
24
Q

sources of Chas outflows

A

1.purchscing materials
2. paying wages
3. repaying loans
4. purchasing fixed assets

25
Q

importance of chaflow forecast

A
  1. tells manager how much cash available. to pay debt
  2. how much business needs to borrow to prevent insolvency
  3. tells whether business is holding too much cash which can be reinvested
26
Q

uses of cashflow forecast

A
  1. starting up business
  2. keep bank informed
    3.manage nbu8siness
27
Q

whats liquidity

A

ability of business. to pay. short term debt

28
Q

what does length of working capital cycle depend on

A
  1. level of invenotries
  2. how quick. business. finds buyers
  3. how long it takes to sell products
29
Q

howtoimproveworkingcapital

A

1.reduceˆnvintorylevel
2.negotiatelongercredittermswithsupplier
3.reducetradereceivables

30
Q

whats credit sales

A

goods sold to customers who will pay for these at an agreed date

31
Q

whats profit

A

difference between revenue and total cost

32
Q

what are the types of profit

A
  1. gross profit
  2. profit
  3. retained profit
33
Q

revenue

A

price times quantity sold

34
Q

total costs

A

cost of sales plus expenses

35
Q

gross profit

A

difference between revenue and cost of sales

36
Q

importance of profit to business

A
  1. reward for business owners for their risk
  2. measure success of business
  3. decide whether or not continue make product
  4. purchase fixed assets and expand
  5. helps attract investors
37
Q

difference between cash and profit

A
  1. many business that makes profit but don’t last since they can’t manage cash
    2.money invested in business or borrowed will increase cash but not profit
  2. capital expenditure decreases cash but not profit
  3. selling goods on cash will increase profit but not cash
38
Q

whats an income statement

A

financial record of revenue, costs and profit of a business

39
Q

importance of profit TO STAAKEHOLDERS

A
  1. shareholders need it to distribute it as dividends
  2. employees job security
  3. lenders make sure profit is enough to repay debt
  4. government give high taxes
  5. suppliers
  6. managers compare to competitors
40
Q

statement of financial position

A

accounting statement that records assets, liabilities and owners equity, shows FINANCIAL HEALTH OF BUSINESS

41
Q

assets

A

resources owned b y business

42
Q

liabilities

A

debt of business that will be payed in future

43
Q

non current assets

A

resources that business owns and expects to use for a long period of time like machinery

44
Q

current assets

A

resources business owns that expects to convert into cash

45
Q

trade receivables

A

amount of money owed to business when customers pay on credit

46
Q

current liabilities

A

debt business expects to repay

47
Q

trade payables

A

debt business has to pay to supplier for goods bought on credit

48
Q

owners equity

A

amount owed by business to its owners

49
Q

why’s it important to check business performance

A

1.identify strength and weakness
2. show wether business is. meaning objectives
3. improve future performance

50
Q

gross profit margin(ratio between profit and revenue)

A

gross profit/revenue X100

51
Q

net profin margin

A

pofit/revenue X100

52
Q

Profit

A

revenue- expenses+sales

53
Q

return on capital employed

A

profit/ capital employees X100

54
Q
A

Business gcse (2 decks)

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