Finance Function Flashcards
What is an income statement
Statement of comprehensive income
What is cash flow
Available cash, not necessarily profit and all the profit is not necessarily cash
What is a Balance sheet
Statement of Financial position
What is owner’s equity
The value of the owner’s money in the business
What are Assets
The possessions of a business
= Owner’s equity + Liabilities
What are Liabilities
The debt that the business is liable to pay
Non-current/ long-term assets
Land buildings, vehicles, Equipment & longterm investments in the bank
Current/ short-term assets
Trading inventory
Debtors
Cash
What is the break- even analysis
The point where the income generated from sales is exactly equal to the total cost
What is the safety margin
How far above the the break- even point the business has to perform in order for it to safely cease to exist
What is a feasibility study
The process of assessing the potential of a new business idea
What is the importance of a Feasibility study
Forces the entrepreneur to think critically about how to cease an opportunity for profitability
How to do a feasibility study
- Describe the business/ project idea
- Describe the market (research )
- If it’s a viable solution idea what’s next?
Viability
Is it worth doing?
Is it practical
What is money management
The ability of an individual to preserve money & make money grow
What is the importance of investments and give examples of investments
Allows the business to grow and be more profitable
- Stocks
- Shares
- funds
- real estates
Formula for ROI
ROI= net profit
_____________________x 100
Cost of investment
What is the importance of insurance
Provides protection against possible eventuality
Fidelity insurance
Cover business against theft by employees
Public liability insurance
Cover business if customer gets hurt/ their property is damaged by employee
