Flash cards to date (21/6/24)
Define Limited Liability
When a business owner has a separate legal identity to their business so their personal assets are not at risk
Define Unlimited Liability
When a business owner has the same legal identity as their business so their personal assets are at risk
Define Sole Trader
Where a business is started and owned by one person who keeps all the profits,
but holds all the responsibilities
Define Partnership
Where a business is started and owned by more than one person, who then share the profits and the responsibilities
Define Shareholder
An owner of a company who receives a dividend as a return for their investment
Define Private Limited Company
A business with limited liability that sells shares to friends and family
Define Public limited company
A business with limited liability that sells shares on the stock exchange
Define Stock market
Where investors can buy and sell ownership of investible assets such as stocks or equities which represent fractional ownership in a company
Define Market growth
The percentage growth in the size of the market measured over a specific period
Define Market share
The percentage of total sales a business’ particular good or service has
Define percentage change
The relative difference between an old value and a new value
Define capital expenditure
Funds spent by a company to acquire or upgrade a long term asset
Investment capital
The expenditure of money to fund a company’s long term growth
Define working capital
The amount of money a business has for carrying out its day to day functions
Define Internal sources of finance
Sources of finance that come from within the business
Define external sources of finance
Sources of finance that come from outside of the business
Define short term sources of finance
business finance in the short term (typically less than a year)
Define long term sources of finance
Business finance in the long term (over a year)
Define owner’s capital
Money invested into the business by the owner
Define Retained profit
Money generated by the business that is kept in the business
Define sale of assets
when established businesses sell assets that are no longer required
Define overdraft
Source of finance for a business where it is allowed to take more money out of its account
than it has deposited
Define Trade credit
When a business orders and receives supplies, but pays for them at a later date
Define Debt factoring
When a business sells its unwanted debts to debt factoring business
Define bank loan
Source of finance for a business where they receive a fixed amount of money for a specified time,
which will need repayment with interest
Define Share capital
The money raised by a business from the sale of shares
Define venture capital
A source of finance normally for small businesses with good growth prospects, where the venture
capitalist normally takes a stake in the business
Define Hire purchase
when a business agrees a contract to acquire an asset by paying an initial instalment and repays the price of the asset plus interest over a period of time
Define Leasing
the business pays a regular amount over a period of time but the item belongs to the leasing company
Define commercial mortgage
a sum of money that is borrowed from the bank that is secured against a business property and payed back in instalments over a long period of time
Define Government grant
a fixed amount of money awarded by the government or charitable organisations
Define sale and leaseback
when a business sells an asset but leases the same asset back from its new owner
Define revenue
the income from sales
Define Fixed costs
Costs that do not vary with output
Define variable costs
Costs that vary with output
Define profit
The difference between revenue and costs
Define cost per unit
the amount of money spent by a business when producing a single unit of a product
Define semi variable cost
expenses that include both fixed and variable cost components
Define direct costs
a cost that is directly tied to the production of a good or service
Defne indirect costs
costs that do not relate to a specific good or service
Define break even
Where total revenue is the same as total costs and no profit or loss is made
Define contribution per unit
the difference between the sale price of a product and the variable costs incurred for it
Define Total contribution
the difference between total sales revenue and total variable costs
Define Margin of safety
The additional output that a business produces or expects to produce more than its breakeven output
Define stakeholder
Anyone with interest in the business
Define Trade receivables
customers who owe the business money
Define trade payables
The money the business owes to suppliers
Define Working capital cycle
the time it takes to convert the total net working capital into cash
Define over trading
when a business expands too quickly and runs into cash flow problems
Define equity
the ordinary share capital of a business
Define Debt
when a business owes someone money
Define Cash flow
a company’s sources and uses of cash over time
Define cash flow forecast
the predicted movement of money in and out of a business over a period of time
Define cash inflow
money coming into the business
Define cash outflow
money going out of the business
Define liquidity
when an asset is converted into cash
Define Net cash flow
The difference between total inflows and outflows
Define opening balance
The amount of money a business has at the start of the month
Define closing balance
The amount of money a business has at the end of the month
Define seasonal demand
fluctuations in output and sales related to the season of the year
Define income statement
A statement that shows a company’s profit and loss over a period of time
Define Cost of sales
the costs that go into providing a service or a product for a customer
Define Gross profit
the difference between revenue and cost of sales
Define net profit
the difference between gross profit and expenses
Define expenses
a cost of operations that a company incurs to generate revenue
Define gross profit margin
the percentage profit made on sales not taking into account expenses
Define net profit margin
the percentage profit after all costs and expenses have been deducted
Define Ratio analysis
the analysis of various pieces of financial information in the financial statements of a business
Define Budget
an estimation of revenue and expenses over a specific period of time
Define variance
the difference between actual and budgeted sales
Define Favourable variance
when costs are lower than expected
Define adverse variance
When costs are higher than expected
Define subordinate
an employee who is not management level and responds to a group of managers
What is a theory x management style?
When employees are strictly controlled and not given any freedom to make decisions
What is buffer stock?
A minimum level of stock
What is lead time?
The amount of time between ordering supplies and then arriving
