Key term definitions 2.3 Flashcards
what is the definition of amortisation?
the writing off of an intangible asset
what is the definition of cost of sales?
the direct costs of a business
what is the definition of exceptional costs?
a one-off cost such as a large bad debt
what is the definition of gross profit?
the difference between revenue/turnover and cost of sales
what is the definition of gross profit margin?
gross profit expressed as a percentage of revenue/turnover
what is the definition of operating profit?
the difference between gross profit and business overheads such as selling and admin expenses
what is the definition of operating profit margin?
operating profit expressed as a percentage of revenue/turnover
what is the definition of net profit?
the difference between operating profit and interest and exceptional items
what is the definition of net profit margin?
net profit before tax expressed as a percentage of revenue/turnover
what is the definition of statement of comprehensive income?
a financial document showing a company’s income and expenditure over a particular time period-usually 1 year
what is the definition of revenue/turnover?
the total income of a business resulting from sales of goods or services
what is the definition of acid test ratio?
similar to the current ratio but excludes stocks from current assets- a more sever test of liquidity
what is the definition of assets?
resources that belong to a business
what is the definition of capital
money put into the business by the owners
what is the definition of current assets?
liquid assets-assets that will be converted into cash within 1 year
what is the definition of current liabilities?
money owed by the business that must be paid within 1 year
what is the definition of current ratio?
FORMULA
assesses whether the business has enough resources to meet any debts that arise in the next 12 months
current liabilites/current assets
what is the definition of intangible assets?
non-physical assets e.g. brand names, patents and customer lists
what is the definition of inventories?
stocks such as raw materials and finished goods held by a business
what is the definition of liabilities?
money owed by the business to banks and supplies etc
what is the definition of liquidity?
the ease with which assets can be converted into cash
what is the definition of net assets?
FORMULA
total assets - total liabilities
what is the definition of non-current assets?
long-term resources that will be used by the business repeatedly over a period of time
what is the definition of non-current liabilities?
money owed by the business for more than 1 year.-long-term liabilities
what is the definition of shareholders’ equity?
the amount of money owed by the business to its shareholders
what is the definition of statement of financial position (balance sheet)?
a summary at a particular point in time of the value of a firm’s assets, liabilities and capital
what is the definition of trade and other payables?
money owed by the business to suppliers and utilities- sometimes called trade creditors
what is the definition of trade and other receivables?
money owed to the business by customers and any repayments made by the business
what is the definition of working capital?
FORMULA
funds left over to meet day-to-day expenses after current debts have been paid.
current assets - current liabilities
what is the definition of administration?
a failing business appoints a specialist to rescue the business or wind it up
what is the definition of external factors?
factors beyond the control of businesses cause it to collapse
what is the definition of internal factors?
factors that businesses are able to control cause it to collapse
what is the definition of overtrading?
the situation where a business does not have enough cash to support its production and sales usually because it’s growing too fast
