Finance and accounting Flashcards
What is working capital
Working capital can be defined as the finance required to pay for the day to day expenses of the business
What does liquidity mean
Liquity refers to the ability of the firm/organisation to pay its day to day expenses
What is the formula for working capital
Current Assets - Current liabilities.
Identify 3 sources of finance(External Long term)
- Long term bank loan
- Hire Purchase
- Government grants
Identify 3 sources of finance(Internal)
- Sales of unwated assets
- Retained profits
- Sales and leasebacks of non-current assets.
What is leasing?
Leasing is obtaining asset but not necessirily purchase the asset, regular payments must be payed in regards to the contract.
Cashflow forecast
an estimate of the future cash inflow and outflow of the business.
Give 3 reasons why accurate cost information is important
- Make accurate decision
- Set strategic pricing decisions
- setting budgets
Formula for Contribution
Sales - Variable costs
Formula for BEP
Fixed Costs/Contribution
