Finance information and Decision (Keywords)

Question 1

Define Start up Capital

Answer 1

Start-up capital is the finance needed by a new business to pay for essential non- current and current assets before it can begin trading

Question 2

Define Working Capital

Answer 2

Working capital is the finance needed by a business to pay for its day-to-day activities

Question 3

Define Capital Expenditure

Answer 3

Capital expenditure is money spent on non-current assets which will last for more than one year

Question 4

Define Revenue Expenditure

Answer 4

Revenue expenditure is money spent on day-to-day expenses which do not involve the purchase of a long-term asset, for example, wages or rent

Question 5

Define Internal Finance

Answer 5

Internal finance is obtained from within the business itself

Question 6

Define External Finance

Answer 6

External finance is obtained from sources outside of and separate from the business

Question 7

Define Micro Finace

Answer 7

Micro-finance is providing financial services - including small loans - to poor people not served by traditional banks

Question 8

Define Crowd Funding

Answer 8

Crowdfunding is funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the internet

Question 9

Define Cashflow

Answer 9

The cash flow of a business is the cash inflows and outflows over a period of time

Question 10

Define Cashflow Cycle

Answer 10

A cash flow cycle shows the stages between paying out cash for labour, materials, and so on, and receiving cash from the sale of goods

Question 11

Define Profit

Answer 11

Profit is the surplus after total costs have been subtracted from revenue

Question 12

Define Cashflow Forecast

Answer 12

A cash flow forecast is an estimate of future cash inflows and outflows of a business, usually on a month-by-month basis. This then shows the expected cash balance at the end of each month

Question 13

Define Cash Net Flow

Answer 13

Net cash flow is the difference, each month, between inflows and outflows.

Question 14

Define Working Capital

Answer 14

Working capital is the finance needed by a business to pay for its day-to-day expenses

Question 15

Define Accounts

Answer 15

Accounts are the financial records of a firm’s transactions

Question 16

Define Final Accounts

Answer 16

Final accounts are produced at the end of the financial year and give details of the profit or loss made over the year and the worth of the business

Question 17

Define Income Statement

Answer 17

An income statement is a financial statement that records the income of a business and all costs incurred to earn that income over a period of time. It is also known as a profit and loss account

Question 19

Define Cost of Sales

Answer 19

The cost of sales is the cost of producing or buying in the goods actually sold by the business during a time period

Question 20

Define Gross Profit

Answer 20

A gross profit is made when revenue is greater than the cost of sales

Question 21

Define Trading Account

Answer 21

A trading accounts shows how the gross profit of a business is calculated

Question 22

Define Net Profit

Answer 22

Net profit is the profit made by a business after all costs have been deducted from revenue. It is calculated by subtracting overhead costs from gross profits

Question 23

Define Depreciation

Answer 23

Depreciation is the fall in the value of a fixed asset over time

Question 24

Define Retained Profit

Answer 24

Retained profit is the net profit reinvested back into the company, after deducting tax and payments to owners, such as dividends

Question 25

Define Statement of Financial Position

Answer 25

The statement of financial position shows the value of a business’s assets and liabilities at a particular time

Question 26

Define Assets

Answer 26

Assets are those items of value which are owned by the business. They may be non- current (fixed) assets or currents assets

Question 27

Define Liabilites

Answer 27

Liabilities are debts owed by the business. They may be non-current liabilities or currents liabilities

Question 28

Define Non Current Assets

Answer 28

Non-current assets are items owned by the business for more than one year

Question 29

Define Current Assets

Answer 29

Current assets are owned by the business and used within one year

Question 30

Define Non-Current Liabilites

Answer 30

Non-current liabilities are long-term debts owed by the business, repaid over more than one year

Question 31

Define Current Liabilites

Answer 31

Current liabilities are short-term debts owed by the business, repaid in less than one year

Question 32

Define Capital Employed

Answer 32

Capital employed is shareholders’ equity + non-current liabilities and is the total long-term and permanent capital invested in a business

Question 33

Define Liquidity

Answer 33

Liquidity is the ability of a business to pay back its short-term debts

Question 34

Define Profitability

Answer 34

Profitability is the measurement of the profit made relative to either the value of sales achieved or the capital invested in the business

Question 35

Define Liquid

Answer 35

liquid means that assets are not easily convertible into cash