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Business > Finance And Accounting > Flashcards

Finance And Accounting Flashcards

1
Q

start up capital

A

the capital needed by an entrepreneur to set up a business

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2
Q

working capital

A

the capital needed to pay for raw materials, day - to - day running costs and credit offered to customers

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3
Q

short term finance

A

money required for short periods of time up to one year

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4
Q

long term finance

A

money required for more than one year

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5
Q

profit

A

the values of goods sold (revenue) less costs

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6
Q

liquidity

A

the ability of a business to pay its short term debts

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7
Q

administrator

A

when administration, manage a business that is unable to pay its debt with the intention of selling it as a going concern

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8
Q

bankruptcy

A

the legal procedure for liquidating a business (or property owned by a sole trader) which cannot fully pay its debt out of its current assets

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9
Q

liquidation

A

when a business ceases trading and its assets are sold for cash to pay suppliers and other creditors

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10
Q

current assets

A

assets that either are cash or likely to be turned to cash within 12 months

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11
Q

current liabilities

A

debts that usually have to be paid within one year

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12
Q

capital expenditure

A

the purchase that are expected to last for more than one year, such as buildings and machinery

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13
Q

revenue expenditure

A

spending on all costs and assets other than non - current assets, which includes wages, salaries and inventory of materials

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14
Q

internal sources

A

raising finance from the business’s own assets or from profit left in the business (retained earnings)

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14
Q

external sources

A

raising finance from sources outside the business, for example banks

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15
Q

retained earnings

A

profit after tax retained in a company rather than paid out to shareholders as dividends

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16
Q

non - current assets

A

assets kept and used by the business for more than one year

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17
Q

overdraft

A

a credit that a bank agrees can be borrowed by a business up to an agreed limit as and when required

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18
Q

factoring

A

selling of claims over trade receivables (debtors) to a specialist organisation (debt factor) in exchange for immediate liquidity

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19
Q

hire purchase

A

a company purchases an assets and agrees to pay fixed repayments over an agreed time period. The asset belongs to the purchasing company once the final payment has been made

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20
Q

leasing

A

obtaining the use of an asset and paying a leasing charge over a fixed period, avoiding the need to raise long term capital to buy the asset. The asset is owned by the leasing comapany

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21
Q

long - term loans

A

loans that do not have to be repaid for at least one year

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22
Q

debentures

A

long - term bonds issued by companies to raise debt finance, often with a fixed rate of interest

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23
Q

share (equity) capital

A

permanent finance raised by companies through the sale of shares

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24
Q

business mortgages

A

long - term loans to companies purchasing a property for business premises, with the property acting as collateral security on the loan

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25
Q

venture capital

A

risk capital invested in business start - ups or expanding small businesses that have good profit potential but do not find it easy to gain finance from other sources

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26
Q

collateral security

A

an asset which a business pledges to a lender and which must be sold off to pay a debt if the loan is not repaid

27
Q

right issue

A

existing shareholders are given the right to buy additional shares at a discounted price

28
Q

microfinance

A

providing finance services for poor and low - income customers who do not have access to the banking services, such as loans and overdrafts, offered by traditional commercial banks

29
Q

crowd funding

A

the use of small amounts of capital from a large numbers of individuals to finance a new business venture

30
Q

cash - flow

A

the sum of cash payments to a business less the sum of cash payments from the business

31
Q

insolvent

A

when a business cannot meet its short term debts

32
Q

cash - flow forecast

A

an estimate of the future cash inflows and outflows of a business

33
Q

cash inflow

A

cash payments into a business

34
Q

cash outflow

A

cash payment out of a business

35
Q

net cash flow

A

estimated difference between cash inflow and cash outflows for the period

36
Q

opening cash balance

A

cash held by the business at the start of the month

37
Q

closing cash balance

A

cash held by the business at the end of the month, which becomes next month’s opening balance

38
Q

credit control

A

monitoring of debts to ensure that credit periods are not exceeded

39
Q

bad debts

A

unpaid customers’ bills that are now very unlikely to ever be paid

40
Q

overtrading

A

expanding a business rapidly without obtaining all the necessary finance, resulting in a cash flow shortage

41
Q

break - even point

A

the level of output at which total costs equal total revenue, when neither a profit nor a loss is made

42
Q

cost centre

A

the section of a business, such as a department or a product, that incurs the costs

43
Q

direct costs

A

these costs can be closely identified with each unit of production and can be allocated to a cost centre

44
Q

indirect costs

A

costs that cannot be identified with a unit of production or allocated accurately to a cost centre

45
Q

fixed costs

A

costs that do not vary with output

46
Q

variable costs

A

costs that do vary with the output

47
Q

total costs

A

variable costs + fixed costs

48
Q

profit centre

A

a section of a business to which a both costs and revenues can be allocated, so profit can be calculated

49
Q

average costs

A

total costs divided by the units produced

50
Q

full costing

A

a method of costing in which all indirect and direct costs are allocated to the products, services or divisions of a business

51
Q

contribution costing

A

costing method that allocates only direct costs to cost centres and profit centres, not overhead costs

52
Q

marginal cost

A

the additional cost of producing one or more unit of production

53
Q

break - even analysis

A

uses cost and revenue data to determine the break even point of production

54
Q

margin of safety

A

the amount by which the current output level exceeds the break - even level of output

55
Q

contribution per unit

A

the price of a product less the direct (variable) costs of producing it

56
Q

budgeting

A

planning future activities by establishing performance targets, especially financial ones

57
Q

budget holder

A

the individual responsible for the initial setting and achievement of a budget

58
Q

variance analysis

A

calculation of the differences between budgets and actual figures, and analysis of the reasons for such differences

59
Q

delegated budgets

A

budgets for which junior managers have been given some authority setting and achieving

60
Q

incremental budgeting

A

uses last year’s budgets as a basis, and an adjustment is made for the coming year

61
Q

zero budgeting

A

sets budgets to zero each year and budget holders have to argue their case for target levels and to receive any finance

62
Q

flexible budgeting

A

cost budgets for each expense are allowed to vary if sales or outputs vary from budgeted levels

63
Q

favourable variance

A

a change from the budget that leads to higher than planned profit

64
Q

adverse variance

A

a change from the budget that leads to lower than planned budgets

Business (6 decks)

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