Finance Flashcards
Start up capital
The finance required by a new business to pay for the essential fixed assets and current assets so that it can start trading
Working capital
Capital available to a business in the short term to pay for day to day expenses
Capital expenditure
The money spent on non current assets
Revenue expenditure
Money spent on day to day expenses
Internal finance
Finance form within the business itself
External finance
Finance from outside and separate from the business
Micro-finance
This provides financial services to poor people who can not get a traditional loan
Short term source of finance
Finance that must be paid back within a year (include : overdraft facility, trade credits, factoring)
Long term source of finance
Finance obtained for a time frame that exceeds a year (includes: share capital, loans and grants)
Cash flow
Cash inflows and outflows over a period of time
Cash flow forcast
Estimate of future cash inflows and outflows of a business usually on a monthly basis and shows the expected cash balance at the end of the month.
Cash inflows
Sums of money received by a business over a period of time
Cash outflows
Sums of money paid out by a business over a period of time
Cash flow cycle
Shows the stages between paying out cash for materials and labor and receiving cash from sales of goods
Profit
Sales revenue- Total costs
Net cash flow
Inflows - outflows
Accounts
Financial records of a businesses transactions
Final accounts
Produced at the end of the financial year and give details to profit or loss made and gives the worth of the business
Gross profit
Sales revenue - cost of sales
Sales revenue
Income to a business over a period of time from the sales of goods
Cost of sales
The direct cost of producing goods that are sold by the business during a period of time
Net profit
Gross profit - expenses
Depreciation
The fall in value of an asset over time
Retained profit
Net profit reinvested into the company
Dividends
Annual payments from company profits to shareholders
Balance sheet
Shows the value of a businesses assets and liabilities at a particular point and time
Assets
Items of value owned by a business
Liabilities
Debts owned by a business
Current liabilities
Short term debts owned by the business
Non current liabilities
Long term debts owned by the business
Current assets
Assets owned by the business to be used within a year
Non current assets
Items owned by the business for more than a year
Liquidity
The ability of a business to pay back its short term debts
illiquid
Assets are not easily turned into cash
Capital employed
Share holders equity + non current liabilities (permanent and long term capital invested in a business)
