KT23: 2.3.1 Profit, 2.3.2 Liquidity

Question 1

corporation tax

Answer 1

a levy on the incomes of companies, i.e you pay a percentage of your pre tax profit

Question 2

Dividends

Answer 2

annual payments made to shareholders

Question 3

fixed overheads

Answer 3

the indirect costs that have to be paid however the business is performing eg: rent and salaries

Question 4

contingency finance

Answer 4

planning the unexpected by either keeping a cash cushion in the firm’s current account or keeping an overdraft facility little-used

Question 5

credit period

Answer 5

the length of time a supplier allows a buyer to wait before paying

Question 6

liquidation

Answer 6

closing the business down by selling off all the assets, paying debts and returning what is left to the shareholders

Question 7

liquidity

Answer 7

the ability of a business to pay its bills on time, which all depends upon having enough cash in the bank

Question 8

working capital cycle

Answer 8

how long it takes for a complete cycle form cash out to cash back in from a customer payment. It could vary from one day to one year