Section B - Business Finance- Key Terms Flashcards
Definition of financial transactions:
Actions by a business that involve money injected or withdrawn from a business.
Definition of HMRC:
A British government responsible for the collection of all types of taxes.
Definition of fraud:
An individual acquires business money for personal gain through illegal actions.
Definition of profit:
When revenue exceeds expenditure.
Definition of loss:
When expenditure exceeds revenue.
Definition of gross profit:
Sales revenue - cost of goods sold.
The cost of actual materials used to produce the quantity of goods sold.
Definition of sales revenue:
Selling price X quantity sold.
Definition of net profit:
Gross profit - other expenses.
Definition of trade receivables:
Money owed to the business from sales made but not paid yet.
Definition of trade payable:
Money the business owes suppliers which hasn’t been paid for.
Definition of fixed assets:
Items of value owned by a business that are likely to stay in the business for longer than a year.
Definition of asset:
Any item of value for an individual or business.
Definition of comission:
Fee paid to a salesperson in exchange for services in facilitating or completing a sales transaction.
Definition of capital items:
Assets brought from capital expenditure that will stay in the business for more than a year.
Definition of statement of financial situation:
A financial document showing the net worth of a business by balancing assets and liabilities.
Definition of depreciation:
Spread the cost of an asset over its useful life.
Definition of internal sources of finance:
Money available to fund expenditure in the business.
Definition of cash flow forecast:
Document showing the predicted cash flow of a business in and out in a given time.
Definition of opening balance:
Amount of cash available in a business at the start of a set time period.
Definition of closing balance:
Amount of cash available in a business at the end of a set time period.
Definition of credit period:
Length of time given to customers to pay for goods and services received.
Definition of liqidity:
Measurement of a business’s ability to meet short term cash paayments.
Definition of insolvent:
When a firm is unable to meet short term cash payments.
Definition of statement of comprehensive income:
Shows business trading position which is used to calculate gross profit then profit/loss.
Definition of statement of financial position:
Business’s net worth at a particular moment in time.
Definition of cost of goods sold:
Actual value of inventory to generate sales.
Definition of opening inventory:
The value of inventory for the business at the start of a financial year.
Definition of closing inventory:
The value of inventory at the end of the end of a financial year.
Definition of historic cost:
The cost of an asset when it was first purchased.
Definition of expected life:
How long an asset is expected to be used.
Definition of residual value:
Asset value when it’s deposed of by the business.
Definition of current assets:
Items owned by the business that changes in value on a regular basis.
Definition of capital employed:
Total capital tied in a business at a point in time.
Shareholders capital + retained profit - drawings = capital employed.
Definition of interfirm:
Between different firms.
Definition of intrafirm:
Within the firm.
Definition of stakeholder:
Anyone with an interest in the business’s activities.
Definition of illiquid:
Not easily converted into cash.
Definition of business-to-business
One business sells to another business.
Definition of business-to-consumer:
One business sells to an individual.
