Section 3 – Accounting and Finance... Flashcards
Hire Purchase.
Buying specific goods with a loan, often provided by a finance house.
Leasing.
Renting or hiring equipment or property.
Retained Profit.
The profit held by a business rather than returning it to the owners.
Short-Term Finance.
Money borrowed for one year or less.
Debenture.
A long-term loan to a business.
Gearing.
The amount of capital raised from loans in relation to the amount raised from the sales of shares.
Long-Term Finance.
Money borrowed for more than one year.
Mortgage.
Long-term loan secured with property.
Share Capital.
Money raised from the sale of shares in a limited company.
Venture Capitalists.
Specialists (individuals or financial institutions), which provide funds for businesses, usually in exchange for an equity stake.
Working Capital Cycle.
The flow of liquid resources into and out of a business.
Cash Outflows.
The flow of money out of a business.
Working Capital.
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.
Budget.
A plan that shows how much money a business expects to spend or receive in a specified period.
Cash Flow.
he flow of money into and out of a business.

Cash Flow Forecast.
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.
Cash Inflows.
The flow of money into a business.

Liquid Asset.
An asset, which is easily changed into cash.
Net Cash Flow.
The difference between the cash flowing in and the cash flowing out of a business in a given time period.
Costs.
Expenses that must be met when setting up and running a business.
Direct Cost.
A cost which can be clearly identified with a particular unit of output.
Fixed Costs.
Costs that do not vary with the level of output.
Indirect Cost or Overhead.
A cost, which cannot be identified with a particular unit of output. It is incurred by the whole organisation or department.
Total Costs.
Fixed cost and variable cost added together.
Total Revenue.
The money generated from the sale of output. It is price multiplied by quantity.
Variable Costs.
Costs, which rise as output levels are increased.
Break Even.
The level of output where total costs & total revenue are exactly the same. Neither a profit nor a loss is made.
Break-Even Chart.
A graph, which shows total cost and total revenue. The break-even pint is where total cost and total revenue intersect.
Margin of Safety.
The amount of output available to be sold above the break-even point where the business makes a profit.
Distributed Profit.
Profit that is returned to the owners of a business.
Dividend.
Money paid to shareholders (owners of the business) when profit is distributed.
Gross Profit.
Sales revenue less cost of sales.
Net profit.
Gross profit less expenses.
Profit.
The money left over after all costs have been subtracted from revenue.
Profit and Loss Account or Income Statement.
A financial document showing a firm’s income and expenditure in a particular time period.
Profit and Loss Account.
Shows how net profit is calculated by subtracting expenses from gross profit.
Profit and Loss Appropriation Account.
Shows how the profit after tax is distributed between owners and the business.
Retained Profit.
Profit that is kept by the business and may be used in the future.
Trading Account.
Shows how gross profit is calculated by subtracting cost of sales from turnover.
Assets.
Resources used or owned by the business in production.
Balance Sheet.
A summary at a point in time of business assets, liabilities and capital.
Capital.
A source of funds provided by the owners of the business used to buy assets.
Current Assets.
Assets likely to be changed into cash within a year.
Current Liabilities.
Debts that have to be repaid within a year.
Drawings.
The money taken from the business by the owner for personal use.
Fixed Assets.
Assets with a life span of more than one year.
Liabilities.
The debts of the business, which provide a source of funds.
Long-Term Liabilities.
Debts that are payable after 12 months.
Net Assets.
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.
Net Current Assets.
Current assets minus current liabilities. Also, known as working capital.
Auditing.
An accounting procedure, which checks thoroughly the accuracy of a company’s accounts.
Acid Test Ratio.
Similar to the current ratio but excludes sticks from current assets. Sometimes called the quick ratio.
Current Ratio.
Assesses the firm’s liquidity by dividing current liabilities into current assets.
Gross Profit Margin or Mark-Up.
Grossed profit expressed as a percentage of turnover.
Return on Capital Employed (ROCE).
The profit of a business as a percentage of the total amount of money used to generate it.
Net Profit Margin.
Net profit expressed as a percentage of turnover.
Ratio Analysis.
A numerical approach to investigating accounts by comparing two related figures.
