Finance Flashcards
Define “capital expenditure.”
Money spent by a business on acquiring or maintaining fixed assets like equipment or property.
What is finance in business?
The management of money, including how businesses source, allocate, and control their funds.
What is revenue expenditure?
Spending on day-to-day running costs of the business, like wages or utilities.
What is working capital?
The funds a business has available for its day-to-day operations (current assets minus current liabilities).
Define “cash flow.”
The movement of money into and out of a business over a period.
What is a cash flow forecast?
A financial plan that estimates the cash inflows and outflows over a period.
What is profit?
The difference between total revenue and total costs.
Define “gross profit.”
Revenue minus the cost of goods sold (COGS).
What is net profit?
Gross profit minus all other business expenses.
What is retained profit?
Profit kept within the business for reinvestment, rather than being distributed to shareholders.
Define “break-even point.”
The level of sales at which total revenue equals total costs, resulting in no profit or loss.
What is the break-even formula?
Break-even = Fixed costs / (Selling price per unit – Variable cost per unit)
What is the purpose of a balance sheet?
To show a business’s financial position at a specific point in time by detailing assets, liabilities, and equity.
What are current assets?
Assets that are likely to be converted into cash within one year, like inventory or receivables.
Define “liabilities.”
Debts or obligations that the business owes to others.
