Key Terms Flashcards
Interest Rate
the proportion of an amount that is charged as interest to the borrower.
Debt
money owed.
Credit Rating
a score given to individuals on how likely they are to repay debts based upon their previous actions.
Bankrupt
when an individual or organisation legally states it inability to repay debts.
Solvent
the ability to meet day-to-day expenditure and repay debts.
Current Account
an account with a bank or building society designed for frequent use e.g. regular deposits and withdrawals.
Overdraft
the ability to withdraw money that you do not have from a current account.
Expenditure
the amount of money you need to cover all your expenses/outgoings, e.g. your mortgage and bills.
Shareholder
someone who has invested in a company in return for equity, i.e. a share of the business.
Saving
placing money in a secure place so that it grows in value and can be used in the future.
Investment
speculative commitment to a business venture in the hope that it generates a financial reward in the future.
Insurance
an agreement with a third party to provide compensation against financial loss.
Premiums
regular payments made by an individual or company to an insurance provider in return for protection.
Financial Transactions
actions by a business that involve money either going into or out of a business.
HM Revenue & Customs (HMRC)
it is a British government department responsible for the collection of all types of taxes.
Fraud
when an individual acquires company money for personal gain, through illegal actions.
Profit
surplus achieved when total revenue (income) from sales is higher that the total costs of a business.
Loss
shortfall suffered when total revenue from sales is lower than the total costs of the business.
Gross Profit
sales revenue minus cost of goods sold (the cost of the actual materials used to produce the quantity of goods sold).
Sales Revenue
quantity sold multiplied bu the selling price.
Net Profit
gross profit minus other expenses, for example, rent and advertising.
Trade Receivables
money owed to the business from sales made but not yet paid for.
Trade Payables
money the business owes from supplies purchased but not yet paid for.
Fixed Assets
item of value owned by a business that are likely to stay in the business for more than one year.
Asset
any item of value owned by an individual or firm.
Commission
a fee paid to a sales person in exchange for services or completing a sales transaction.
Capital Items
assets bought from capital expenditure.
Statement of Financial Situation
shows the net worth of a business by balancing its assets against its liabilities, often called balance sheet.
Depreciation
an accounting technique used to spread the cost of an asset over its useful life.
Internal Sources of Finance
money available to fund expenditure from within the business.
Cash Flow Forecast
shows the predicted flow of cash into and out of a business over a given period of time.
Opening Balance/Closing Balance
amount of cash available in a business at the start of a set time.
Credit Period
the length of time given to customers to pay for goofs or services received.
Liquidity
measures a firm’s ability to meet short-term cash payments.
Insolvent
when a firm is unable to meet short-term cash payments.
Statement of Comprehensive Income
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.
Statement of Financial Position
a snapshot of a business’s net worth at a particular moment in time, normally the end of a financial year.
Costs of Goods Sold
the actual value of inventory used to generate sales.
Opening Inventory
the value of inventory in a business at the start of a financial year.
Closing Inventory
the value of inventory at the end of a financial year.
Historic Cost
the cost of an asset when it was first purchased.
Expected Life
how long as asset is expected to be used within a business.
Residual Value
the value of an asset when it is disposed of by the business, for example, real value.
Current Assets
items owned by the business that change in value a regular basis, such as stock.
Capital Employed
the total amount of capital tied up in a business at a point in time.
Interfirm
between different firms, for example, comparing the performance of two different house builders.
Intrafirm
within the firm, for example comparing this years results with last years.
Stakeholder
anyone with an interest in the activities of a business, whether directly or indirectly involved.
Illiquid
not easily converted into cash.
Business-to-Business
B2B refers to when one business sells to another business.
Business-to-Consumer
B2C refers to when one business sells to an individual.
