Finance Flashcards
Name another source of finance
Selling assets- no interest payments
However - might have sold am asset which is needed for later use
Name adv and disadvantage of a bank loan
Adv- arranged quickly, and a repayment is over a long period of time
Dis- interest and a colletaral
What is a profit and loss account
The revenue subtracting the costs
How do you work out gross profit
Revenue - cost of sales
How do you work out the net profit
Goes profit - overheads
What is revenue
Income made from selling goods or services
What is cost of sales
Costs which are directly involved providing the products such as materials and wages and electricity costs
What is overheads
Costs remain constant also called expenses
What is a balance sheet
The assets and liabilities of a business
Give an example of a fixed asset
Buildings
Give an example of a current asset
Stock
What is current liabilities
Bills which the firm has to pay soon
How do you work out the net current assets
Current assets- current liabilities
How do you work out gross profit margin
Gross profit / sales revenue x 100 (%)
How do you work out net profit margin
Net profit / sales revenue x 100(%)
How do you work out net current assets
Fixed assets +. Current assets - current liabilities - long term liabilities
What is a liquidity ratio
Amount of cash a business has
How do you work out the current ratio
Current assets / current liabilities
How do you work out acid test ratio
Current assets - stock / current liabilities
What happens if the acid test is too high ( above 1)
Means there’s too much cash lying about and would be more profitable to invest this money
What happens if the acid test is much below 1?
It means it’s worrying and needs to do something about its costs and liabilities
Name one source of finance
Retained profits: don’t have to pay interest and are arranged immediately
However - are only available in profitable businesses.
