Section 3 – Accounting and Finance...

Question 1

Hire Purchase.

Answer 1

Buying specific goods with a loan, often provided by a finance house.

Question 2

Leasing.

Answer 2

Renting or hiring equipment or property.

Question 3

Retained Profit.

Answer 3

The profit held by a business rather than returning it to the owners.

Question 4

Short-Term Finance.

Answer 4

Money borrowed for one year or less.

Question 5

Debenture.

Answer 5

A long-term loan to a business.

Question 6

Gearing.

Answer 6

The amount of capital raised from loans in relation to the amount raised from the sales of shares.

Question 7

Long-Term Finance.

Answer 7

Money borrowed for more than one year.

Question 8

Mortgage.

Answer 8

Long-term loan secured with property.

Question 9

Share Capital.

Answer 9

Money raised from the sale of shares in a limited company.

Question 10

Venture Capitalists.

Answer 10

Specialists (individuals or financial institutions), which provide funds for businesses, usually in exchange for an equity stake.

Question 11

Working Capital Cycle.

Answer 11

The flow of liquid resources into and out of a business.

Question 12

Cash Outflows.

Answer 12

The flow of money out of a business.

Question 13

Working Capital.

Answer 13

The funds left over to meet day-to- day expenses after current debts have been paid. It is calculated by current assets minus current liabilities.

Question 14

Budget.

Answer 14

A plan that shows how much money a business expects to spend or receive in a specified period.

Question 15

Cash Flow.

Answer 15

he flow of money into and out of a business.



Question 16

Cash Flow Forecast.

Answer 16

The prediction of all expected receipts and expenses of a business over a future time period which shows the expected cash balance at the end of each month.

Question 17

Cash Inflows.

Answer 17

The flow of money into a business.



Question 18

Liquid Asset.

Answer 18

An asset, which is easily changed into cash.

Question 19

Net Cash Flow.

Answer 19

The difference between the cash flowing in and the cash flowing out of a business in a given time period.

Question 20

Costs.

Answer 20

Expenses that must be met when setting up and running a business.

Question 21

Direct Cost.

Answer 21

A cost which can be clearly identified with a particular unit of output.

Question 22

Fixed Costs.

Answer 22

Costs that do not vary with the level of output.

Question 23

Indirect Cost or Overhead.

Answer 23

A cost, which cannot be identified with a particular unit of output. It is incurred by the whole organisation or department.

Question 24

Total Costs.

Answer 24

Fixed cost and variable cost added together.

Question 25

Total Revenue.

Answer 25

The money generated from the sale of output. It is price multiplied by quantity.

Question 26

Variable Costs.

Answer 26

Costs, which rise as output levels are increased.

Question 27

Break Even.

Answer 27

The level of output where total costs & total revenue are exactly the same. Neither a profit nor a loss is made.

Question 28

Break-Even Chart.

Answer 28

A graph, which shows total cost and total revenue. The break-even pint is where total cost and total revenue intersect.

Question 29

Margin of Safety.

Answer 29

The amount of output available to be sold above the break-even point where the business makes a profit.

Question 30

Distributed Profit.

Answer 30

Profit that is returned to the owners of a business.

Question 31

Dividend.

Answer 31

Money paid to shareholders (owners of the business) when profit is distributed.

Question 32

Gross Profit.

Answer 32

Sales revenue less cost of sales.

Question 33

Net profit.

Answer 33

Gross profit less expenses.

Question 34

Profit.

Answer 34

The money left over after all costs have been subtracted from revenue.

Question 35

Profit and Loss Account or Income Statement.

Answer 35

A financial document showing a firm’s income and expenditure in a particular time period.

Question 36

Profit and Loss Account.

Answer 36

Shows how net profit is calculated by subtracting expenses from gross profit.

Question 37

Profit and Loss Appropriation Account.

Answer 37

Shows how the profit after tax is distributed between owners and the business.

Question 38

Retained Profit.

Answer 38

Profit that is kept by the business and may be used in the future.

Question 39

Trading Account.

Answer 39

Shows how gross profit is calculated by subtracting cost of sales from turnover.

Question 40

Assets.

Answer 40

Resources used or owned by the business in production.

Question 41

Balance Sheet.

Answer 41

A summary at a point in time of business assets, liabilities and capital.

Question 42

Capital.

Answer 42

A source of funds provided by the owners of the business used to buy assets.

Question 43

Current Assets.

Answer 43

Assets likely to be changed into cash within a year.

Question 44

Current Liabilities.

Answer 44

Debts that have to be repaid within a year.

Question 45

Drawings.

Answer 45

The money taken from the business by the owner for personal use.

Question 46

Fixed Assets.

Answer 46

Assets with a life span of more than one year.

Question 47

Liabilities.

Answer 47

The debts of the business, which provide a source of funds.

Question 48

Long-Term Liabilities.

Answer 48

Debts that are payable after 12 months.

Question 49

Net Assets.

Answer 49

The total at the bottom of the first part of the balance sheet. It is the value of all assets less the value of all liabilities.

Question 50

Net Current Assets.

Answer 50

Current assets minus current liabilities. Also, known as working capital.

Question 51

Auditing.

Answer 51

An accounting procedure, which checks thoroughly the accuracy of a company’s accounts.

Question 52

Acid Test Ratio.

Answer 52

Similar to the current ratio but excludes sticks from current assets. Sometimes called the quick ratio.

Question 53

Current Ratio.

Answer 53

Assesses the firm’s liquidity by dividing current liabilities into current assets.

Question 54

Gross Profit Margin or Mark-Up.

Answer 54

Grossed profit expressed as a percentage of turnover.

Question 55

Return on Capital Employed (ROCE).

Answer 55

The profit of a business as a percentage of the total amount of money used to generate it.

Question 56

Net Profit Margin.

Answer 56

Net profit expressed as a percentage of turnover.

Question 57

Ratio Analysis.

Answer 57

A numerical approach to investigating accounts by comparing two related figures.