Finance

Question 1

Expenditure Budget

Answer 1

A detailed plan of expected expenditure over a certain period of time. For start-ups, the budget will normally cover the first year.

Question 2

Income Budget

Answer 2

A detailed plan of income expected over a certain period of time. For start-ups, the budget will normally cover the first year.

Question 3

Profit Budget

Answer 3

A detailed plan of the expected profit a firm makes over a certain period of time. For start-ups, the budget will normally cover the first year.

Question 4

Budget

Answer 4

A financial plan for the future concerning the revenues and costs of a business.

Question 5

Delegated Budget

Answer 5

Handing over control of budgets to individuals and teams at all levels within a business. It is the act of passing authority (not responsibility) down the organisational structure.

Question 6

Variance analysis

Answer 6

The process of assessing differences between budgeted and actual figures. CALCULATION: ( budgeted-actual)

Question 7

Trade credit

Answer 7

Trade credit is offered when purchasers are allowed a period of time to pay for products they have bought (usually 30 days).

Question 8

Cash flow forecast

Answer 8

A cash flow forecast shows the inflows and outflows of money that are expected / predicted in a business over a given period of time.

Question 9

Venture Capital

Answer 9

Venture capital is finance provided to small or medium-sized firms that seek growth, but which may be considered risky by typical share buyers or other lenders.

Question 10

Sale and leaseback

Answer 10

A method of raising finance / overcoming cash flow difficulties; it involves a business selling a major asset (e.g land and buildings) and then leasing the same asset back from the new owner.

Question 11

Overdraft

Answer 11

A bank overdraft is when a bank allows a holder of a current account (customer) to overspend their account up to an agreed limit.

Question 12

Bank loan

Answer 12

An agreement to borrow a fixed sum of money over an agreed time.

Question 13

Net profit margin

Answer 13

Calculates the business’s profit after all the deduction of costs as a percentage of its sales. CALCULATION: (net profit/sales revenue) x 100

Question 14

ROCI (return on capital invested)

Answer 14

Compares the amount of profit to the level of investment needed to start the enterprise / project. CALCULATION: (net profit/capital invested) x 100

Question 15

Profit

Answer 15

The difference between the income of a business and its total costs
CALCULATION: profit = revenue – total costs

Question 16

Profitability

Answer 16

Profitability normally measures profits in relation to some other measure such as sales revenue.

Question 17

Cash

Answer 17

Cash is the money that exists in a business at a point in time in the form of cash in hand or at the bank, it is available for immediate use.