Finance Flashcards
What are fixed assets
Assets a firm owns that it plans on keeping for more than a year such as machinery
What is in the trading account
Turnover, total income, profit
Cost of sales, amount of money spent to produce the products that were sold
Gross profit, revenue - direct costs
What is in the profit loss account
Indirect costs, expenses
Operating profit, gross profit - expenses
Net profit, operating profit - money paid to other companies
What is the appropriation account
A record showing what happens to the net profit, how much is given as dividends, how much is paid as tax and how much is retained
What are assets that a business doesn’t keep for more than a year
Currant assets
What is the gross profit margin and what is its formula
It is the percentage of money from customers that doesn’t go into making the product, e.g. £1 in from customer, 10p goes to making product, 90p left over, so gross profit margin = 90%
Gross profit margin = gross profit / revenue
What is net profit margin and formula
This is the percentage of revenue that becomes net profit.
Net profit margin = net profit / revenue
What are curran liabilities
Debts or bills a firm will have to pay soon. Such as dividends and tax
What is net current assets
The difference between currant assets and currant liabilities.
Net currant assets = currant assets - currant liabilities
What is share capital
The total amount of capital into a businesses when its shares were bought. Not the currant value of the shares
What are retained profits and reserves
All the net profit that wasn’t paid as dividends or tax and is just sitting in the businesses bank for future projects or problems
What are long term liabilities
Money the businesses will have to pay but will take more than a year to pay it such as bank loans or money owed to debentures
Why are balance sheets important to stakeholders
Can be used to access the financial health of a business
What is the currant ration
The ration between currant assets and currant liabilities which shows how easily a business should be able to pay its currant liabilities
Currant ratio = currant assets / currant liabilities
Anything above 1.5 is good
What is the acid test ratio and formula
A ratio that assumes a business won’t be able to sell any stock in the next year to see how easy it will be able to pay its bill if nothing sells
Acid test ratio = (currant assets - stock value) / currant liabilities
