Key Terms

Question 1

Interest Rate

Answer 1

the proportion of an amount that is charged as interest to the borrower.

Question 2

Debt

Answer 2

money owed.

Question 3

Credit Rating

Answer 3

a score given to individuals on how likely they are to repay debts based upon their previous actions.

Question 4

Bankrupt

Answer 4

when an individual or organisation legally states it inability to repay debts.

Question 5

Solvent

Answer 5

the ability to meet day-to-day expenditure and repay debts.

Question 6

Current Account

Answer 6

an account with a bank or building society designed for frequent use e.g. regular deposits and withdrawals.

Question 7

Overdraft

Answer 7

the ability to withdraw money that you do not have from a current account.

Question 8

Expenditure

Answer 8

the amount of money you need to cover all your expenses/outgoings, e.g. your mortgage and bills.

Question 9

Shareholder

Answer 9

someone who has invested in a company in return for equity, i.e. a share of the business.

Question 10

Saving

Answer 10

placing money in a secure place so that it grows in value and can be used in the future.

Question 11

Investment

Answer 11

speculative commitment to a business venture in the hope that it generates a financial reward in the future.

Question 12

Insurance

Answer 12

an agreement with a third party to provide compensation against financial loss.

Question 13

Premiums

Answer 13

regular payments made by an individual or company to an insurance provider in return for protection.

Question 14

Financial Transactions

Answer 14

actions by a business that involve money either going into or out of a business.

Question 15

HM Revenue & Customs (HMRC)

Answer 15

it is a British government department responsible for the collection of all types of taxes.

Question 16

Fraud

Answer 16

when an individual acquires company money for personal gain, through illegal actions.

Question 17

Profit

Answer 17

surplus achieved when total revenue (income) from sales is higher that the total costs of a business.

Question 18

Loss

Answer 18

shortfall suffered when total revenue from sales is lower than the total costs of the business.

Question 19

Gross Profit

Answer 19

sales revenue minus cost of goods sold (the cost of the actual materials used to produce the quantity of goods sold).

Question 20

Sales Revenue

Answer 20

quantity sold multiplied bu the selling price.

Question 21

Net Profit

Answer 21

gross profit minus other expenses, for example, rent and advertising.

Question 22

Trade Receivables

Answer 22

money owed to the business from sales made but not yet paid for.

Question 23

Trade Payables

Answer 23

money the business owes from supplies purchased but not yet paid for.

Question 24

Fixed Assets

Answer 24

item of value owned by a business that are likely to stay in the business for more than one year.

Question 25

Asset

Answer 25

any item of value owned by an individual or firm.

Question 26

Commission

Answer 26

a fee paid to a sales person in exchange for services or completing a sales transaction.

Question 27

Capital Items

Answer 27

assets bought from capital expenditure.

Question 28

Statement of Financial Situation

Answer 28

shows the net worth of a business by balancing its assets against its liabilities, often called balance sheet.

Question 29

Depreciation

Answer 29

an accounting technique used to spread the cost of an asset over its useful life.

Question 30

Internal Sources of Finance

Answer 30

money available to fund expenditure from within the business.

Question 31

Cash Flow Forecast

Answer 31

shows the predicted flow of cash into and out of a business over a given period of time.

Question 32

Opening Balance/Closing Balance

Answer 32

amount of cash available in a business at the start of a set time.

Question 33

Credit Period

Answer 33

the length of time given to customers to pay for goofs or services received.

Question 34

Liquidity

Answer 34

measures a firm’s ability to meet short-term cash payments.

Question 35

Insolvent

Answer 35

when a firm is unable to meet short-term cash payments.

Question 36

Statement of Comprehensive Income

Answer 36

shows the trading position of the business which is used to calculate gross profit. then takes into account all other expenses to calculate the profit or loss for the year.

Question 37

Statement of Financial Position

Answer 37

a snapshot of a business’s net worth at a particular moment in time, normally the end of a financial year.

Question 38

Costs of Goods Sold

Answer 38

the actual value of inventory used to generate sales.

Question 39

Opening Inventory

Answer 39

the value of inventory in a business at the start of a financial year.

Question 40

Closing Inventory

Answer 40

the value of inventory at the end of a financial year.

Question 41

Historic Cost

Answer 41

the cost of an asset when it was first purchased.

Question 42

Expected Life

Answer 42

how long as asset is expected to be used within a business.

Question 43

Residual Value

Answer 43

the value of an asset when it is disposed of by the business, for example, real value.

Question 44

Current Assets

Answer 44

items owned by the business that change in value a regular basis, such as stock.

Question 45

Capital Employed

Answer 45

the total amount of capital tied up in a business at a point in time.

Question 46

Interfirm

Answer 46

between different firms, for example, comparing the performance of two different house builders.

Question 47

Intrafirm

Answer 47

within the firm, for example comparing this years results with last years.

Question 48

Stakeholder

Answer 48

anyone with an interest in the activities of a business, whether directly or indirectly involved.

Question 49

Illiquid

Answer 49

not easily converted into cash.

Question 50

Business-to-Business

Answer 50

B2B refers to when one business sells to another business.

Question 51

Business-to-Consumer

Answer 51

B2C refers to when one business sells to an individual.