Finance Key Words

Question 1

Factoring

Answer 1

A financial transaction and a type of debtor finance in which a business sells its accounts receivable to a third party at a discount.

Question 2

Trade credit

Answer 2

An arrangement to buy goods or services on account, that is, without making immediate cash payment . For many businesses, trade credit is an essential tool for financing growth.

Question 3

Retained profit

Answer 3

is the profit kept in the company rather than paid out to shareholders as a dividend. Retained profit is widely regarded as the most important long-term source of finance for a business.

Question 4

Hire purchase

Answer 4

A hire purchase is a method of buying goods through making installment payments over time.

Question 5

Government Grant

Answer 5

A government grant is a financial award given by the federal, state or local government to an eligible grantee.

Question 6

Sale of assets

Answer 6

In a typical business or private transaction involving a sale of assets, the seller gains ownership of some form of cash or its equivalent, while the buyer obtains ownership of the asset.

Question 7

Overdraft

Answer 7

An overdraft is an extension of credit from a lending institution when an account reaches zero. An overdraft allows the individual to continue withdrawing money even if the account has no funds in it or not enough to cover the withdrawal.

Question 8

Mortgage

Answer 8

a legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Question 9

Loan

Answer 9

a thing that is borrowed, especially a sum of money that is expected to be paid back with interest.

Question 10

Leasing

Answer 10

Written or implied contract by which an owner (the lessor) of a specific asset (such as a parcel of land, building, equipment, or machinery) grants a second party (the lessee) the right to its exclusive possession and use for a specific period and under specified conditions.

Question 11

Bank Loan

Answer 11

A bank loan is the most common form of loan capital for a business. A bank loan provides medium or long-term finance. The bank sets the fixed period over which the loan is provided (e.g. 3, 5 or 10 years), the rate of interest and the timing and amount of repayments.