Revision Questions 2 Flashcards
Define Leasing
Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of payments.
Define Insurance and give two examples
Insurance is when organisations try to minimise the cost and the risk of loss by taking out insurance policies
Define Investment Strategy
Investment means that we risk funds to make a possible return or gain those funds in the future.
What is the Break Even point Formula
(Fixed Costs+ Desired Profit) / (Selling Price Per unit - Variable Costs Per Unit)
Define Debt Finance
Debt Finance is when your business needs extra funds to keep it running smoothly so they buy stuff on credit,
Define Equity Finance
Equity finance is the the capital which is invested into the business by the owners.
Is Long term Fiance Longer then 10 years or shorter ?
Longer then 10 years
Define Risk Management
Risk Management is enforced to minimise risk in the workplace.
What term is used when there is excess funds lying idle and are not generating income.
Over-Capitalisation
what term is used when there isn’t enough cash invested to be able to run the business on a day to day basis
Under-Capitalisation
Define Fixed Costs and Variable Costs
Fixed costs are ones that do not vary with sales. For example, one of the fixed costs of a high street shop is the rent paid for the property. The rent is still the same whether the shop sells one item or thousands.
Variable costs are ones that vary with sales. For example, imagine that a bookshop buys in books for an average price of $5 each. It then resells the books for a higher price. For the bookshops the variable cost is $5 per unit
Why is Financial Management needed
Financial Management is required for a business or organisation so it can reach its goals.
Define Bank Over Draft
Bank Over Draft is when a bank allows you to have a negative balance in your cheque account.
What is Liquidity
Liquidity is having enough cash flow to be able to operate your business on a day to day basis.
What is Profitability
Profitability is ensuring that the organisation earns enough revenue to cover all the expenses or day to day costs and generate enough income to make profit.
