Financial information and decisions Flashcards

1
Q

Start-up capital

A

The capital needed by an entrepreneur when first starting a business

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2
Q

Working capital

A

The capital needed to finance the day-to-day running expenses and pay the short-term debts of a business

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3
Q

Non-current (fixed)

A

Resources owned by a business which will be used for a period longer than a year, for example buildings and machinery

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4
Q

Capital expenditure

A

Spending by a business on non-current assets such as machinery and buildings

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5
Q

Long-term finance

A

Debt or equity used to finance the purchase of non-current assets or finance expansion plans. Long-term debt is borrowing a business does not expect to repay in less than five years

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6
Q

Short-term finance

A

Loans or debt that a business expects to pay back within one year

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7
Q

Retained profit

A

Profit remaining after all expenses, tax and dividends have been paid and which is put back into the business

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8
Q

Overdraft

A

An agreement with the bank which allows a business to spend more money than it has in its account up to an agreed limit

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9
Q

Trade receivables

A

Amount owed to a business by its customers who bought goods on credit

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10
Q

Bank loan

A

Provision of finance by a bank which the business will repay with interest over an agreed period of time

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11
Q

Leasing

A

Obtaining the use of a non-current asset by paying a fixed amount per time period for a fixed period of time. Ownership remains with the leasing company

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12
Q

Hire purchase

A

The purchase of an asset by paying a fixed repayment amount per time period over an agreed period of time

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13
Q

Mortgage

A

A long-term loan used for the purchase of land or buildings

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14
Q

Debenture

A

A bond issued by a company to raise long-term finance usually at a fixed rate of interest

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15
Q

Share issue

A

A source of permanent capital available to limited liability companies

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16
Q

Equity finance

A

Permament finance provided by the owners of a limited company

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17
Q

Micro-finance

A

Small amounts of capital loaned to entrepreneurs in countries where business finance is often difficult to obtain

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18
Q

Crowd-funding

A

Financing a business idea by obtaining small amounts of capital from a large number of people, most often using the internet and social media networks

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19
Q

Cash-flow forecast

A

An estimate of the future cash inflows and outflows of a business

20
Q

Net-cash flow

A

Cash inflow minus cash outflow

Net-cash flow = cash inflow - cash outflow

21
Q

Liquidity

A

The abillity of a business to pay its short-term debts

22
Q

Credit sales

A

Goods sold to customers who will pay for these at an agreed date in the future

23
Q

Gross profit

A

The difference between revenue and cost of sales

Gross profit = revenue - cost of sales

24
Q

Profit

A

The difference between revenue and total costs

Profit = gross profit - expenses

25
Total cost
Cost of sales plus expenses | Total cost = cost of sales + expenses
26
Revenue
The amount earned from the sale of products | revenue = selling price x quantity sold
27
Cost of sales
The cost of purchasing the goods used to make the products sold
28
Expenses
Day-to-day operating expenses of a business
29
Income statement
A financial statement which records the revenue, costs and profits of a business for a given period of time
30
Statement of financial position
An accounting statement that records the assets, liabilities and owner's equity of a business at a particular date
31
Assets
Resources that are owned by a business
32
Liabilities
Debts of the business that will have to be paid sometime in the future
33
Non-current (fixed) assets
Resources that a business owns and expects to use for more than a year
34
Current assets
Resources that the business owns and expects to convert to cash before the date of the next financial position
35
Trade receivables
The amount of money owed to the business by customers who have been sold goods on credit
36
Current liabilities
Debts of the business which it expects to pay before the date of the next statement of financial position
37
Trade payables
The amount a business owes to its suppliers for goods bought on credit
38
Non-current liabilities
Debts of the business which will be payable after more than one year
39
Owner's equity
The amount owed by the business to its owners; includes capital and retained profits
40
Shareholder's equity (funds)
Alternative term for owner's equity, but can only be used by limited liability companies
41
Gross profit margin %
Ratio between gross profit and revenue | Gross profit margin = gross profit/revenue x 100
42
Profit margin %
Ratio between profit before tax and revenue | Profit margin = profit/revenue x 100
43
Adding value
Selling a product for more than it costs to produce it
44
Return on capital employed (ROCE)
Ratio between profit before taxt and capital employed | ROCE = profit/capital employed x 100
45
Current ratio
Ratio between current assets and current liabilites | current ratio = current assets/current liabilities
46
Acid test ratio
Ratio between liquid assets and current liabilities. | Acid test ratio = (current assets - inventories)/current liabilites