Finance and Accounting

Question 1

Start up capital

Answer 1

Capital needed by an entrepreneur to set up a business

Question 2

Capital ependiture

Answer 2

Involves purchasing assets that are expected to last over a year such as buildings and machinery.

Question 3

Revenue expenditure

Answer 3

Spending on all costs and assets other than fixed assets. It includes wages and salaries and materials bought for inventory.

Question 4

Working capital

Answer 4

Capital needed to pay for raw materials, day to day running costs and credit offered to customers

Question 5

Liquidity

Answer 5

The ability of a firm to pay its short term debts

Question 6

Liquidation

Answer 6

When a firm stops trading and its assets are sold for cash to pay suppliers and other creditors

Question 7

Overdraft

Answer 7

Bank agrees to business borrowing up an agreed limit as and when required

Question 8

Grants

Answer 8

Dont have to pay back, however not widely available

Question 9

Reduce working capital

Answer 9

Relatively easy, increases efficiencies, however dangers of reducing too much.

Question 10

Retained profits

Answer 10

Source of permanent finance

Question 11

Venture capital

Answer 11

Risk capital invested in business that have good profit potential but do not find it easy to gain finance from other sources.

Question 12

Average cost

Answer 12

Total cost of items produced

Question 13

Direct costs

Answer 13

These are costs that can be clearly identified with each unit of production and can be allocated to a cost centre

Question 14

Indirect costs

Answer 14

Costs that cannot be identified with a unit of production or allocated accurately

Question 15

Marginal cost

Answer 15

Cost of producing the next item

Question 16

Fixed cost

Answer 16

Costs that do not change with output

Question 17

Variable costs

Answer 17

Costs that vary with output

Question 18

Total costs

Answer 18

Fixed cost + variable costs

Question 19

Break even point of production

Answer 19

Level of output at which total costs equal total revenue neither a profit or a loss is made.

Question 20

Income statement

Answer 20

Records the revenue, costs and profit of a business pver a given period of time.

Cost of sales

Question 21

Asset

Answer 21

This is an item owned by a person or company that is regarded as having value.

Question 22

Cash

Answer 22

Money in the form of notes, coins, cheques etc.

Question 23

Cash flow

Answer 23

The sum of cash payments to a business less than the sum of cash payments made by the business

Question 24

Difference between cash and profit

Answer 24

Cash is the difference between money coming in and money going out

Profit is difference between sales revenue and costs