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Business Theme 2 > Key Terms > Flashcards

Key Terms Flashcards

1
Q

Economic variables

A

Features of an economist which have effects on business and consumers eg unemployment, inflation and exchange rates

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2
Q

Internal finance

A

The raising of capital from within the business eg business/owner’s capital, personal savings, retained profit

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3
Q

Owner’s capital

A

A source of (internal) finance provided by the owner of a business

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4
Q

Retained profit

A

Profit is re-invested back into the business which is not paid as a dividend. It is an internal source of finance.

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5
Q

Sale of assets

A

A type of internal finance, involves selling resources that belong to the business

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6
Q

Bank loan

A

An external method of finance borrowed from a bank paid back, with interest (over a period of time)

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7
Q

Business angels

A

Individuals who invest in a business in exchange for a stake in the business (shares)

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8
Q

Crowd funding

A

An external source of finance where a large number of individuals provide funding for a business or project in return for shares

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9
Q

External finance

A

Money raised from outside the business

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10
Q

Grant

A

A sum of money given by a government or other organisation. It does not need to be repaid and no interest is charged.

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11
Q

Leasing

A

A contract to acquire the use of resources such as property or equipment

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12
Q

Loan

A

An external source; amount of money borrowed, usually repayable after a fixed term of more than 12 months

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13
Q

Overdraft

A

When a business has a negative balance in their bank account because the amount withdrawn is greater than the current balance

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14
Q

Peer-to-peer funding

A

When a person lends money to other individuals or businesses via online transactions

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15
Q

Share capital

A

The finance raised a business selling of new shares

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16
Q

Trade credit

A

Where a firm receives stock from a supplier, which it does not have to pay for until later

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17
Q

Venture capital

A

External source of finance when the business issues shares to a small number of investors in return for a capital injection into the company

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18
Q

Liability

A

A liability is an obligation to pay another person

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19
Q

Limited liability

A

The obligation of a shareholder for the debts of a business is limited to the value of their investment

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20
Q

Unlimited liability

A

The obligation of a business owner to cover all the debts of the business

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21
Q

Business plan

A

A document giving details of a variety of aspects about the business in order to provide a strategic look at the business and to attract investors. It contains details such as the product, costs, revenues, cashflow forecasts

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22
Q

Cash flow

A

The movement of cash into and out of a business over a period of time

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23
Q

Cash inflow

A

The flow of cash into a business over

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24
Q

Cash outflow

A

The flow of cash out of a business over

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25
Cash-flow forecasts
The predicted flow of cash into and out of a business over a period of time
26
Closing balance
Cash left in the account at the end of the month. Net Cash Flow + Opening Balance
27
Net cashflow
The difference between cash flowing in and out of a business over a period of time. Cash Inflow - Cash Outflow
28
Opening balance
Cash in the bank on the first day of the month
29
Consumer trends
Habits or behaviour of those involved in the use of goods and services
30
Economic uncertainty
Where consumers are unable to predict their future sales and costs
31
Sales forecast
A prediction of the expected level of sales volume for a business for a future period
32
Average cost
The cost of producing one unit. Total Costs / Output
33
Fixed costs
Costs that do not change when output changes
34
Revenue
The amount of income for a business generated from its sales. Selling Price x Quantity
35
Sales revenue
Selling Price x Sales Volume
36
Total costs
Total fixed costs plus total variable costs
37
Variable costs
Costs that vary according to the level of outout
38
Break-even
The level of output where the total revenue is equal to the total cost. Fixed Costs / Unit Contribution
39
Unit contribution
Selling Price - Variable Cost Per Unit
40
Margin of safety
The difference between the current or planned level of output and the break-even level of output
41
Adverse variance
Negative variance eg higher costs than budget
42
Budget
A financial plan of income and expenditure prepared in advance
43
Favourable variance
Positive variance eg lower costs than budget
44
Historical budgeting
A budget based upon previous financial figures
45
Variance analysis
Shows the difference between budgeted and actual figures and can be calculated at the end of a financial period, once actual figures are known
46
Zero based budget
A type of budget where no money is allocated for spending unless it has firstly been justified
47
Cash
An asset of a business which can come from investors, lenders or customers
48
Cost of sales
The cost of inventory bought or produced
49
Gross profit
Revenue - cost of sales
50
Gross profit margin
Gross profit/Sales revenue x100
51
Operating profit
Gross profit - other operating expenses
52
Operating profit margin
Operating profit/Sales revenue x100
53
Profit
Is recorded straight away after sales. Total revenue - total costs
54
Profit for the year margin
Net profit/Sales revenue x100
55
Profit for the year / net profit
Operating profit - interest
56
Profitability
Profit as a proportion of sales
57
Statement of comprehensive income
A document to show income and expenditure of a business over a financial year
58
Tax
A charge made by governments on activities, earnings and income of individuals and businesses
59
Acid test ratio
Current assets-Inventory/Current liabilities
60
Assets
Valuable things that a business can use
61
Capital
Cash put into the business by the owner
62
Current assets
Liquid assets, those assets that will be converted into cash within 12 months e.g. inventories, trade receivables and cash
63
Current liabilities
Debts owed by a business that must be repaid within one year
64
Current ratio
Current assets/Current liabilities
65
Liabilities
Debts owed by a business to lenders and suppliers
66
Liquidity
The ability to pay bills in cash when they fall due or The ability to meet current liabilities with current assets
67
Net assets
Total assets - Total liabilities
68
Non current assets
Long term resources that will be used by the business for more than one year e.g. Property and equipment
69
Non current liabilities
Debts owed by the business for more than one year e.g. Loans
70
Shareholders equity
The value of the shareholders' investment in a business
71
Statement of financial position / balance sheet
A summary at a particular point in time of the value of a firm’s assets, liabilities and equity
72
Total equity
Share capital + Retained profit or, owner's capital + retained profit less drawings
73
Working capital
Working capital is the difference between the current assets and current liabilities of the business. It gives some indication of the liquidity level within the business.
74
External causes for business failure
The factors outside the control of a business which might cause it to fail, e.g. competition, legislation, customer tastes and economic conditions
75
Financial factors for business failure
Factors which may contribute to a business running out of cash, e.g. late payments, inability to borrow
76
Internal causes for business failure
Factors which a business can control e.g. poor decision-making, loss of key staff
77
Non financial factors for business failure
Can come from inside or outside the business e.g. poor management, external shocks
78
Overtrading
The situation where a business does not have enough cash to support its production and sales, usually because it is growing too fast

Business Theme 2 (6 decks)

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