finance

Question 1

variable costs

Answer 1

those that change in line with the amount of business e.g. cost of buying raw materials

Question 2

working capital

Answer 2

the finance available for the day-to-day running of the business

Question 3

Angel investors

Answer 3

investors who back a business before it has opened its doors, taking a full equity risk

Question 4

collateral

Answer 4

an asset used as security for a loan

Question 5

crowdfunding

Answer 5

obtaining external finance from many individual, small investments

Question 6

public limited company plc

Answer 6

company with limited liability and shares which are available to the public

Question 7

seedcorn capital

Answer 7

the early stage finance that might come from an angel investor

Question 8

share capital

Answer 8

business finance that has no guarantee of repayment or of annual income, gains share of control and potential profits

Question 9

stock market

Answer 9

market for buying/selling company shares

Question 10

venture capital

Answer 10

high-risk capital invested in a combination of loans and shares

Question 11

bankrupt

Answer 11

individual is unable to meet personal liabilities

Question 12

creditors

Answer 12

those owed money by a business

Question 13

limited liability

Answer 13

owners are not liable for the debts of the business, lose no more than what they invested

Question 14

sole trader

Answer 14

a one person business with unlimited liability

Question 15

unlimited liability

Answer 15

owners liable for any debts incurred by the business

Question 16

cash flow forecast

Answer 16

estimating future monthly cash inflows and outflows to find out the net cash flow

Question 17

just-in-time

Answer 17

ordering stock so that it arrives just before it is needed

Question 18

overdraft

Answer 18

short-term borrows from a bank, only borrows what it

needs

Question 19

contingency plans

Answer 19

plans held in reserve in case things go wrong

Question 20

real incomes

Answer 20

changes in household incomes after allowing for changes in prices

Question 21

sales forecast

Answer 21

a method of predicting future sales using statistical methods

Question 22

trend

Answer 22

the general path that a series of values follows over time, disregarding variations or random fluctuations

Question 23

piece rate labour

Answer 23

paying workers per item they make

Question 24

sales volume

Answer 24

the number of units sold in a time period

Question 25

contribution

Answer 25

total revenue less variable costs. calculation of contribution is useful for businesses that are responsible for a range of products

Question 26

margin of safety

Answer 26

amount by which current output exceeds the level of output necessary to break even

Question 27

adverse variance

Answer 27

difference between budgeted and actual figures that is damaging to the firms profit

Question 28

criteria

Answer 28

yardsticks against which success can be measured

Question 29

expenditure budget

Answer 29

setting a maximum figure on what a deportment or manager can spend over a period of time

Question 30

favourable variance

Answer 30

difference between budgeted and actual figures that boosts a firms profit

Question 31

income budget

Answer 31

setting a minimum figure for the revenue to be generated by a product, department or manager

Question 32

zero budgeting

Answer 32

setting all future budgets at £0 to force managers to justify spending levels

Question 33

corporation tax

Answer 33

a levy on the incomes of companies

Question 34

dividends

Answer 34

Annual payments made to shareholders

Question 35

fixed overheads

Answer 35

indirect costs that have to be paid however let the business is performing

Question 36

contingency finance

Answer 36

planning for the unexpected

Question 37

credit period

Answer 37

length of time a supplier allows a buyer to wait before paying

Question 38

liquidation

Answer 38

closing the business down by selling off the assets

Question 39

liquidity

Answer 39

ability of a business to pays its bills on time depends on amount of cash in bank

Question 40

working capital cycle

Answer 40

time it takes for complete cycle from cash out to cash back from customer payment

Question 41

fixed costs

Answer 41

those that do not change as the number of sales change e.g. rent/salaries