Financial Terms Flashcards

1
Q

Reasons why a business would need finance

A

Start up a business (pay for premise, new equipment and ads)

Run the business (paying off staff wages,and suppliers)

Expand the business (pay for a new branch in a different city or country)

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2
Q

What is the calculation for REVENUE

A

Selling price per unit x number of units sold

All the money coming in

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3
Q

What is the calculation for PROFIT

A

Total revenue - Total cost

How much money you make out of your product/ service

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4
Q

What is the calculation for COST

A

Fixed cost + Variable

All the money going out

Fixed:(Salary, rent, company car) stays the same

Variable:(Wages, electrical bill, stock) changes according to the output

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5
Q

What is a RECIPT

A

Money that comes in for you to use

Sales, government loan, family

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6
Q

What is a PAYMENT

A

What your spending money on

Rent, adverts, product

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7
Q

What is finance

A

The money needed to start up a business

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8
Q

What i the difficulty in raising finance

A

New businesses find it difficult to raise finance because they usually have just a few customers and many competitors. Lenders are put off by the risk that the start-up may fail. If that happens owner might be unable to repay borrowed money

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9
Q

What are the internal sources of finance

A

Retained profit
Share capital
Sale and lease back
Owners capital

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10
Q

Retained profit

A

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

Advantage:there is more money to reinvest into the company;money available for growth and higher returns on investments

Disadvantages:the company will owe more income taxes and will not pay as many dividends(distribution of profits between shareholders)

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11
Q

Share capital

A

For companies, its the funding invested by shareholders

Advantage:shareholders can buy as many stocks as possible,they can elect a new board of directors, right to vote

Disadvantages:company can go broke, a lot of hard work and the shares can fluctuate

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12
Q

What is Fixed cost

A

Costs that remain constant

Rent or machinery

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13
Q

What is variable costs

A

Costs that vary with output

Usually increase at a constant rate relative to labour and capital

Wages, utilities and materials used in production

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14
Q

Why is revenue and profit important

A

For a company to keep going they need to generate enough revenue to cover its cost and earn profit

They are the details that show on a companies income, or profit and loss statement

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15
Q

Start up and running costs

A

Start up costs are costs that you pay when starting the business (E.G. For a bakery the ovens)

Running costs are costs that you keep paying (the ingredients)

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