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Business > Finance > Flashcards

Finance Flashcards

1
Q

Formula for revenue

A

Quantity x selling price

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2
Q

Formula for profit

A

Revenue - costs

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3
Q

Total costs formula

A

Fixed costs + variable costs

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4
Q

Total variable costs formula

A

Variable cost per unit x quantity

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5
Q

Average unit costs

A

Total costs / output

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6
Q

Gross profit formula

A

Revenue - costs of sales

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7
Q

Net profit formula

A

Gross profit - expenses

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8
Q

Gross profit margin formula

A

(Gross profit /revenue) x 100

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9
Q

Net profit margin formula

A

(Net profit / revenue) x 100

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10
Q

Average rate of return percentage formula

A

(Average annual profit / cost of investment) x 100

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11
Q

Break even point formula

A

Total fixed costs / (selling price per unit - variable costs per unit )

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12
Q

Net cash flow formula

A

Total cash inflow - total cash outflow

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13
Q

What is the main reason businesses need to raise finance?

A

To fund operations and growth.

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14
Q

List three advantages of using owner’s capital as a source of finance.

A
  • No need to repay
  • No interest to pay
  • Does not affect ownership and control
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15
Q

What is a disadvantage of using owner’s capital?

A

Owner may not have enough savings.

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16
Q

What is retained profit?

A

Profit that is not distributed to shareholders as dividends.

17
Q

What is trade credit?

A

When a business buys goods to sell and does not need to pay the supplier for a period of time.

18
Q

What is an overdraft?

A

An arrangement with a bank that allows a business to spend more money than it has in its account.

19
Q

List two advantages of taking on a new partner.

A
  • The new partner may bring new skills
  • No need to repay
20
Q

What is a loan?

A

A sum of money borrowed for a stated period at an agreed rate of interest.

21
Q

Fill in the blank: Owners’ capital is money from savings ______ the business by the owner(s).

A

put into

22
Q

What is the main advantage and disadvantage of crowdfunding

A

New investors can contribute a lot of money to the business, no need to repay
Ownership will be shared if money is raised through investment

23
Q

What type of companies can issue shares?

A

Limited companies

24
Q

List three sources of short-term finance.

A
  • Owners’ capital
  • Sale of assets
  • Trade credit
25
Q

List two sources of medium-term finance.

A
  • Bank loan
  • Retained profit
26
Q

What are the typical time frames for long-term finance?

A

5 years or more

27
Q

What is advantage of an overdraft

A

Interest is only paid on the amount owed, meets short term cash flow problems

28
Q

What is the potential disadvantage of using trade credit?

A

Goods must be paid for even if they do not sell.

29
Q

What is a share issue?

A

Selling new shares to raise more money.

30
Q

List three sources of long-term finance.

A
  • Owners’ capital
  • Crowdfunding
  • Share issue
31
Q

What impact does taking on a new partner have on ownership?

A

The new partner will have a say in the running of the business and a share of the profits.

32
Q

What is one disadvantage of taking a loan?

A

Interest must be paid.

33
Q

Advantages of trade credit

A

-no interest if repaid within agreed time limit

34
Q

Disadvantage of an overdraft

A

Interest is charged for each day which can be expensive

35
Q

What is sale of assets

A

Goods owned by the business are sold to raise money

36
Q

Advantages and disadvantages of sales of assets

A

A - no need to repay
D - may take time to sell

37
Q

Advantages and disadvantages of retained profit

A

A- no need to repay
D- business may not have made profits

38
Q

Advantages of a loan

A

Repayment is paid in fixed sums over a period of time and usually paid monthly

39
Q

Advantages and disadvantages of a share issue

A

A- new investors can contribute a lot of money to business
D- shares can only be sold by limited companies

Business (7 decks)

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