KEY TERMS

Question 1

what are start up costs?

Answer 1

the amount of money spent setting up a business before it starts trading

Question 2

what are operating costs?

Answer 2

money spent on a regular basis to keep a business running

Question 3

what is income?

Answer 3

money which is paid into a business

Question 4

what are fixed/indirect costs?

Answer 4

expenditure on items which does not change with the number of items sold or produced

Question 5

what are variable/direct costs?

Answer 5

costs which vary according to the number of Items sold or produced

Question 6

what is the total cost?

Answer 6

the total amount of money spent running a business over a certain period of time

Question 7

what is expenditure?

Answer 7

money that a business spends

Question 8

what are overheads?

Answer 8

the everyday running costs of the business

Question 9

what is the profit?

Answer 9

occurs when revenue is more than expenditure

Question 10

what is loss?

Answer 10

occurs when expenditure is more than revenue

Question 11

what is budgeting?

Answer 11

planning future expenditure and revenue targets with the aim of ensuring a profit is made

Question 12

what is budgetary control?

Answer 12

the process of checking what is actually happening, comparing this with the plan and taking actions if things are not correct

Question 13

what are cash inflows?

Answer 13

the amount of money entering a business’s bank account

Question 14

what are cash outflows?

Answer 14

the amounts of money leaving a business’s bank account

Question 15

what is net cash flow?

Answer 15

the difference between the cash inflow and outflow figures over a particular time period

Question 16

what is cash balance?

Answer 16

the amount of money forecast to be in the bank account after the net cash flow figure has been added or subtracted from the existing bank balance

Question 17

what is overdraft?

Answer 17

this occurs if a business pays more out if its bank account that it has in credit, the bank may allow this but will make an extra change

Question 18

what is the capital?

Answer 18

money spent by the business in items which should last a long time(assets)

Question 19

what is the cost of sales?

Answer 19

the cost of producing a product

Question 20

what is the gross profit?

Answer 20

the money made from selling a product (the sales revenue) after the costs of producing that product (cost of sales) has been deducted.

Question 21

what is net profit?

Answer 21

the money made from selling a product after all costs( expenditure) have been deducted from the gross profit

Question 22

what is a financial year?

Answer 22

the trading period over which a business collects information for their annual income statement (for example, a business might have a financial year that starts on 1 may and ends 30 april)

Question 23

what are assets?

Answer 23

items that a business buys that normally lasts a long time, such as a van or a computer or money it is owed

Question 24

what are debtors/ trade recievables?

Answer 24

people who owe money to the business for goods or services they have received. trade payables are traders to whom the business owes money because they have supplied goods or services

Question 25

what are liabilities?

Answer 25

amount of money which business owes

Question 26

what are share capitals?

Answer 26

the amount of money invested in the business by the shareholders

Question 27

what are working capitals?

Answer 27

money the business can raise quicly which is calculated by deducting current liabilities